Report: Top Crypto Exchange Bithumb Faking Up To 94% Of Trading Volume; Bithumb Denies Allegations

[PRIBO247]

Cryptocurrency exchange rating service CER has
accused Korea-based Bithumb , the world's second-
largest crypto exchange by volume, of faking much
of its trading volume since late summer 2018.

In September, CER says, Bithumb ranked at the
bottom of the top ten global exchanges as measured
by CoinMarketCap, at around $350 million in daily
trade volume. But by November 11, Bithumb
peaked at $4.4 billion, more than 12 times as much.
Today, Bithumb ranks second on CMC's list of
crypto exchanges as measured by reported volume
at $1.4 billion. (Bithumb does not appear on CMC's
"adjusted volume" ranking.

The reason, according to CER?
Wash trading, or simultaneously selling and buying
at the same time to create misleading and artificial
activity.
"Judging from our multifaceted investigation on
Bithumb charts we see the signs of trade volumes
manipulations, specifically, wash trading," CER
marketing lead Gleb Myrko told me via Facebook
Messenger. "Having calculated Price-Volume
Correlation we came to conclusion that the trade
volume performance is not linked to price
fluctuation on the exchange."

One example of odd trading patterns includes a 10X
jump in BTC daily trade volume in September,
which does not appear to be accompanied by
fundamental causal factors.
Other examples include strange activity spikes in
the first few minutes of the 11AM hour daily that
delivered 95% of the daily total volume, and
irregular trade volumes that didn't align with price
moves, CER says.

In addition, average transaction size ballooned
from .21 BTC in the beginning of the summer to a
very significant 5.88 BTC, or $37,600 USD, from
October 15 to November 11.

The trades followed an odd pattern, as well. For
example, BTC transactions on September 9 totaled
an astounding 7,500 in just five minutes. That's 39%
of the day's total trades, and 94% of the whole
day's volume.

According to CER, other coins showed similar
patterns, including LTC, ETC, XMR, ZEC, OMG, and
BTG.
One coin, WTC, showed the most intense artificial
activity, CER says.
"WTC stands out from all the coins we observed, as
it was only listed on the exchange on the last day of
August and had the shortest pump period which
started on October 28th and lasted till November
11th," CER states in a document shared with me.
"For that reason its pump was one of the most
intensive. The inflated daily volume of Waltonchain
jumped by 350 times from 348k WTC (on average
prior to the pump) to 122.5mln WTC (on average
during the pump) only to then drop by by 1,450
times in one day from 206.7mln WTC to 141.8k
WTC on November 12th."

I asked Bithumb about the allegations, and the
company dismissed them out of hand.
"Bithumb is doing nothing to inflate trading
volume," an unnamed company representative told
me via email. "Bithumb is not selling mining-based
coin. Bithumb is trying to get more customers by
providing various promotions just like any other
company in the world as a normal business."
CER is a service by Hacken Ecosystem , and Hacken
offers a "white hat" community token. Concerned
that these allegations might be motivated by
business concerns, I asked Hacken if the company
had ever tried to list on Bithumb.

The answer?
"No, never."

Cryptocurrency experts I spoke to did not find this
kind of behavior difficult to believe, though they
stressed that to evaluate this specific accusation they
would need to review the evidence carefully.
That said, there seems to be little trust in the crypto
world ... perhaps appropriate for currency which is
supposed to function in a trustless environment. Or,
perhaps not.
"They all inflate numbers," says Aryeh Altshul, CRO
at Hexa Labs, a blockchain consultancy. "It’s the
normal practice in crypto."

All of the non-U.S. exchanges are inflating
transactions, agrees Brandon Wirtz, CEO of AI
company Recognant , adding that many in the U.S.
are doing the same ... and using buffers between
legitimate buy and sell bids to buy and re-sell coins
between the kosher trades.
"It causes volatility and velocity which can be good
for 50 percent-plus more traffic," he said.
Crystal Clare Stranger, founder and CEO of
PeaCounts , a blockchain-based payroll payments
company, says that this is quite possible and even
common.

"In the crypto space it is common to follow the
adage of 'fake it 'til you make it' and many people
grossly exaggerate how successful they are. Many
companies have used market manipulators to pump
the value of their tokens to look successful, and
other exchanges have done this to break into the
top ten."
"It is very easy for a centralized exchange to trade
dummy accounts off-chain using bots to pop
volume," Stranger added. "And as the exchange
themselves bear little cost for these transactions,
essentially just the computing cost, [it
becomes] very tempting, especially with so many
exchanges opening in the last couple years. It is a
very competitive market."

Another expert suggested that this could be
connected to Bithumb's well-publicized hacks in
2017 and 2018.
"Originally the breach on June 19 was thought to
have resulted in the stolen crypto being sent to
unknown hacker wallets," says Morgan Steckler,
CEO at iTrustCapital , a digital currency retirement
planning company. "However, if this recent
fraudulent transaction data proves to be true, and if
Bithumb was able to evade detection through
multiple recent audits of their security and
transaction protocols, it is also entirely possible that
the 39 addresses thought to belong to the hackers
actually belonged to the exchange itself."
Several experts did not want to be named.
"Basically, take all the illegal stock trading activites
that have been banned over the years and move
them into crypto. Why? Because it's the Wild Wild
West," said one, who manages companies on both
the fiat and cryptocurrency sides of finance.
"Ghost orders are huge ... it's where you open a buy
and sell at the same time across multiple accounts,
then close off one side of all the transactions
(example buy) side and then run with your short
position (sell side)."

Another expert suggests that Bithumb may have
inadvertently contributed to Bitcoin's continuing
price collapse.
"According to data reported by CCN, there is
certainly evidence to suggest a strong correlation
between the timing of Bithumb’s promotion
expiration and the sudden, and for many, shocking
plummet that continues to play out across the
industry," says Travis Barker, CTO of
Dash Marketing and early adopter and proponent
of cryptocurrencies. "So far, I haven’t seen evidence
to suggest malicious intent. In other words, I don’t
know if Bithumb was intentionally or incorrectly
inflating volume numbers, or simply running
highly successful promotions to that effect."
CER representatives seem fairly certain that there
was intentional malfeasance.

"Bithumb has mastered a multi-factored approach
to conceal its foul play," says CER's Myrko. "As far
as we are able to judge the manipulations were
fulfilled via matching opposite orders with the same
price or by simply drawing transactions out of thin
air, so-called "painting the tape."
The goal, CER suggests, may have been to establish
Bithumb as a leading global crypto exchange. The
result, however, could be extremely negative.
It "undermine the entire image of the blockchain
sphere as an environment of trust and
transparency," says Myrko. "Such irresponsible
activity makes crypto field less than unwelcoming
for the investors and industries who saw blockchain
as a new opportunity."

All that said, it's important to reiterate that Bithumb
denies the accusations.
CER is planning to publish all of its data -- over 20
pages of charts, images, and documentation of what
it considers to be fraudulent behavior.
At that point Bithumb will be able to respond
directly to the accusations and, perhaps, offer an
explanation.

https://www.forbes.com/