DEX-Based Insider Trading Rife: Report

A new study from crypto and DeFi-native market surveillance and risk monitoring firm Solidus Labs, has found that insider trading in crypto is “far more prevalent” than previously reported.

The firm says data from its DEX-based insider trading detection tool, Halo, shows evidence that insiders have traded against more than half of all ERC-20 token (fungible tokens created using the Ethereum network) listing announcements on major centralised exchanges since 2021.

In total, Solidus says it has identified more than 100 entities – individual cryptocurrency wallets, or groups of connected wallets – that have executed over 400 suspected insider trades since January 2021. 51 “serial insiders” have used decentralised exchanges to buy and then sell soon-to-be-listed cryptocurrencies on two or more occasions, with certain serial insiders trading against more than 25 distinct listings apiece.

Of the 234 ERC-20 token listings announced by the centralised exchanges examined in the report since January 2021, 131 have shown signs of insider activity, in some cases netting individuals over $200,000 in profits within minutes, Solidus says.

The report provides data on the challenge of crypto insider trading, with case studies and walkthroughs of the methods used by crypto insiders.

“Our study affirms that DEX-based insider trading is a major market integrity problem — but one with a clear solution,” says Chen Arad, CXO and co-founder of Solidus Labs. “The permanent, public, and traceable nature of blockchains means that we can detect and deter this phenomenon with unprecedented transparency. With this technology, we can help regulators and exchanges enable safe crypto trading.”