Siphon (SIPHON) news

Common Cryptocurrency Scams: Bitget's Safety Guide

Cryptocurrency has surged in popularity over the past few years, drawing in countless investors eager to tap into the digital gold rush. However, every silver lining has a cloud. The booming crypto sector has also given birth to a myriad of scams and frauds. This article will outline these scams and give tips on how to avoid them. Phishing Scams Phishing remains a top threat. Scammers use emails, SMS, or messaging platforms, often masquerading as reputable entities or businesses. Their objective is simple – to trick individuals into revealing sensitive data such as login details, seed phrases, or private keys. Always be skeptical of unsolicited messages, and never share your private keys or passwords. Learn more: Your Guide to Defeating Phishing Scams Tips for Bitget Users: - Activate the anti-phishing code in the ‘Security ’ section. Once you’ve set up your code, it’ll be included in all official Bitget emails. - Always ensure you're on the official Bitget website by visiting the Bitget Official verification channel. Ponzi Schemes Ponzi schemes are another rampant scam in the crypto world. Here, fraudsters lure investors with the promise of lucrative and attractive returns on their crypto investments. However, they use funds from new investors to pay off earlier ones. Eventually, this house of cards crumbles, leaving investors high and dry. To sidestep Ponzi schemes, always be skeptical of investment propositions that sound too good to be true. Fake ICOs/ IEOs Initial Coin Offerings (ICOs) and Initial Exchange Offerings (IEOs) are popular fundraising avenues for budding crypto startups. But not all are genuine. Many are orchestrated by scammers who set up fake websites or social media profiles to promote their sham ICOs. Unsuspecting investors who pour money into these ventures soon find their funds vanish into thin air. To steer clear of fake ICOs/ IEOs, always conduct thorough research into the company and its team before parting with your money. Bitget's solution: Bitget Launchpad is your trusted platform for vetted projects. We meticulously select only the most promising projects, having already offered IEOs to nine handpicked projects. Hacking Attacks crypto exchanges and wallets are prime targets for hackers. These cybercriminals deploy a myriad of tactics, from phishing to malware attacks, to breach security and siphon off funds. To fortify against hacking attempts, always employ strong passwords and enable two-factor authentication, especially for your Bitget account. Pump-and-Dump Schemes A pump-and-dump scheme usually involves a group of insiders planning to buy a particular low-priced token, which is normally new and has a small market cap. The insiders then use marketing tools such as social media to spread the news about the token/ the project, hype it up to draw investors and encourage trading activity, increase demand for the stock, and drive up the price. When the token price is high, the insiders then rapidly sell off their own supply, pocketing profits and tanking the token’s value. This is when the majority of investors are stuck with mostly worthless tokens that they may not be able to liquidate quickly. Rug Pulls Derived from the idiom "pull the rug out", a rug pull in the crypto world refers to the development team suddenly withdrawing all liquidity and support from their newly launched project, leaving unsuspecting investors with nothing but a handful of worthless tokens. Rug pulls are most commonly seen in the DeFi (decentralized finance) world, and many investors, novice and seasoned alike, have fallen victim to this scam. Learn more: What is a Rug Pull? Tips to avoid Rug Pulls and Pump-and-Dump schemes ● Do your own research (DYOR). Never trust someone just because they sound persuasive. ● Be vigilant. Always play safe when you smell something fishy. ● Choose trusted exchanges to trade on. A trustworthy exchange usually requires extensive vetting and audit processes before listing a coin. Bitget, one of the world's leading crypto exchanges, is a prime example. Why Bitget? Bitget stands as a leading global centralized exchange, solidly dedicated to preventing scams and frauds. This ensures that both user funds and data remain uncompromised. When it comes to security challenges, Bitget adopts a comprehensive risk control strategy, incorporating both hot and cold wallet segregation. This approach is backed by industry giants in security technology, including Suntwin Technology, Qingsong Cloud Security, HEAP, Armors, and more. Bitget's relentless dedication to security has been validated with a place in the top 10 Exchanges by Cybersecurity Rating from Crypto Exchange Ranks (CER). We're also proud to have received 12 A+ Ratings from SSL Labs, acknowledging our efforts to shield user data and assets. At Bitget, your security isn’t just a concern—it's a promise. We consistently push boundaries to amplify our security protocols. Sign up with Bitget today and dive into a cryptocurrency trading experience where safety is paramount!

Poloniex Hack, Create2 Exploitation, and Protecting Your Digital Asset

TL;DR - Poloniex was hacked for $126 million on November 10. Justin Sun said that Poloniex's financial position could cover the losses. The exchange resumed deposits and withdrawals on November 15. - Hackers have been exploiting Create2, a legitimate code of Ethereum, to bypass security alerts and drain millions of USD from user’s wallets for months. - In the wake of increasing threats in the crypto world, users need to be mindful of a few practical measures to better protect their digital assets. Poloniex Was Hacked For $126 Million On November 10 The cryptocurrency community was rocked by a significant security breach at Justin Sun's cryptocurrency exchange, Poloniex, resulting in the unauthorized access and draining of its hot wallets to the tune of $126 million. The heist sent shockwaves through the cryptocurrency community, raising concerns about the overall security of digital assets. What Happened During the Poloniex Hack? The attack, which commenced at 10:30 AM UTC, unfolded across multiple blockchains, including Ethereum, TRON, and BTC. The attacker's methodical progression showcased a sophisticated understanding of blockchain ecosystems, enabling them to exploit vulnerabilities on each platform. The first alarms regarding the security breach were sounded by reputable blockchain security firms, Cyvers and PeckShield, on X (formerly Twitter) at around 10:55 UTC, November 10. Approximately half an hour after the unauthorized transactions began, Poloniex, in response to the escalating situation, notified its users that the wallet had been "disabled for maintenance." This move aimed to mitigate further damage and buy time for a thorough investigation into the breach. The gravity of the situation was further confirmed when Poloniex investor Justin Sun acknowledged the breach in a tweet. Sun's acknowledgment added weight to the severity of the incident, signaling a unified front in addressing the crisis. The Aftermath of the Poloniex Hack In the aftermath of the attack, Poloniex remained steadfast in its commitment to its users. The exchange initiated a whitehat bounty, engaged with the crypto community, and collaborated with security auditing firms to assess and bolster its security measures. Facing adversity head-on, Poloniex took proactive measures by offering a whitehat bounty of 5%, encouraging the perpetrators to return the fund. Additionally, Arkham's on-chain intel market offered a $4000 bounty for information leading to the identification of the hacker. These collective efforts showcased the community's resilience and commitment to mitigating the impact of the breach. Justin Sun also took to X to assure users that Poloniex's financial position could cover the losses, providing a sense of stability amid the crisis. The consequences of the hack extended beyond the immediate financial losses, influencing token prices in the market. Notably, the Poloniex hacker strategically purchased $20 million worth of TRON token (TRX), causing a significant surge in the token's price. The intricate financial maneuvers highlighted the interconnected nature of the crypto landscape. Poloniex Resuming Deposits and Withdrawals on November 15 Poloniex announced the restoration of deposit and withdrawal services on November 15, 2023. The platform reported that restoration efforts were mostly completed, and the platform was operating smoothly. To enhance fund security, Poloniex said that it enlisted a top-tier security auditing firm without revealing what firm it was, and that ongoing evaluation processes were expected to take several more days. Exploiting Create2 on Ethereum: The Code Behind Crypto Heists Besides the hacks often associated with the exchange, cryptocurrency enthusiasts were recently confronted with a new threat. A piece of code called Create2, initially designed for legitimate purposes within the Ethereum network, has been taken advantage of by hackers to execute a series of sophisticated attacks, revealing vulnerabilities that extend beyond individual platforms. Introduction to Create2 and its Legitimate Purpose in the Ethereum Network Create2 was originally created with a legitimate purpose: to predict the address of a contract before it is deployed on Ethereum. This functionality serves various constructive purposes, such as aiding platforms like Uniswap in efficiently managing and deploying contracts. However, in the wrong hands, this seemingly innocuous piece of code has become a weapon of choice for malicious actors. Misuse of Create2 by Hackers to Bypass Security Alerts Hackers, with a keen understanding of the Ethereum ecosystem, have exploited Create2 to bypass security alerts effectively. They would create temporary wallet addresses to receive funds after a user clicks on a seemingly innocent but malicious signature. Typically, users are prompted to "approve" a signature when interacting with a smart contract or sending funds. The attackers, cunningly disguising permissions within this signature, gain unauthorized access to a user's wallet. Create2's exploitation allows hackers to execute malicious signatures without triggering the security alerts that would typically warn users. After gaining access to private keys of the user’s wallet, the perpetrators can make transactions without being detected. This methodical approach has enabled them to siphon significant amounts of cryptocurrency undetected for an extended period. ScamSniffer and SlowMist have conducted extensive research on the extent of the theft facilitated by Create2 exploitation. Their findings reveal a staggering figure: more than $60 million has been stolen in the past six months alone. This equates to a total of more than 99,000 victims falling prey to the hackers' ingenious use of Create2, highlighting the scope and severity of the issue. Impact on the Crypto Community and Broader Implications of Code Exploitation The repercussions of Create2 exploitation extend far beyond individual victims and platforms. The broader crypto community now grapples with the realization that even well-established codes within blockchain networks can be repurposed for malicious intent. The incident is a wake-up call for both developers and users to reassess and reinforce security measures in an ever-evolving digital landscape. The revelation of Create2's exploitation underscores the need for constant vigilance and proactive security measures within the cryptocurrency space. As the community collectively struggles with the aftermath of these code-based attacks, the implications reach beyond immediate financial losses, prompting a reassessment of the foundational security infrastructure supporting blockchain networks. Practical Measures to Protect Your Digital Assets in the Face of Crypto Threats As the cryptocurrency landscape becomes more intricate, recent incidents, such as the Poloniex hack and the exploitation of the Create2 code, underscore the critical need for users to adopt robust security measures. Protecting your digital assets in this vulnerable environment requires a multi-faceted approach that combines awareness, technology, and proactive engagement. 1. Understanding and Monitoring Signature Approvals One of the fundamental steps in protecting your digital assets is to understand and closely monitor signature approvals. Be vigilant when interacting with smart contracts or executing transactions, especially when prompted to "approve" a signature. Regularly review and verify transaction details, ensuring they align with your intentions. This heightened awareness can act as an initial line of defense against unauthorized access to your assets. 2. Utilizing Hardware Wallets for Enhanced Security Consider upgrading your security infrastructure by opting for hardware wallets. Unlike online wallets or software solutions, hardware wallets store your private keys offline, providing an additional layer of protection against hacking attempts. These physical devices are less susceptible to remote cyber threats, making them a secure choice for storing substantial amounts of cryptocurrency. 3. Educating Users on Potential Phishing and Fraud Attempts Empower yourself with knowledge to recognize and thwart potential phishing and fraud attempts. Be cautious of unsolicited emails, messages, or social media communications that request sensitive information or encourage immediate actions. Legitimate entities will not ask for your private keys or personal information. By staying informed, you can confidently navigate the crypto space and shield yourself from fraudulent schemes. If you're new to the market, don’t fret. Bitget provides an array of informative articles to quickly acquaint you with the essentials and keep you alert to potential scams. An Advanced Security Guide on Bitget Common Cryptocurrency Scams and Frauds Bitget's Ultimate Shield: Your Guide to Defeating Phishing Scams 4. Regularly Updating and Patching Software Vulnerabilities Maintaining the security of your digital assets involves actively managing the software you use. Regularly update your wallets, exchange platforms, and any other crypto-related applications to ensure you benefit from the latest security patches. Outdated software may contain vulnerabilities that hackers can exploit, making proactive updates an essential aspect of a robust security regimen. 5. Only Doing Transactions with Trusted Exchanges Exercise caution when selecting cryptocurrency exchanges for your transactions. Opt for platforms that prioritize user security and transparency. Bitget, for instance, outperforms industry standards by providing strong proof of reserves with a ratio of 199%, verifiable through a Merkle Tree proof. Additionally, the platform offers a $300 million Protection Fund, acting as a solid shield against potential asset losses for users. Choose exchanges with proven track records, transparent security measures, and proactive initiatives to safeguard your funds. 6. General Best Practices for Users in the Crypto Market As the cryptocurrency ecosystem matures, it’s essential that users adhere to general best practices. Create strong, unique passwords for your accounts, enable two-factor authentication wherever possible, and consider using dedicated devices for your crypto activities. Regularly review your financial statements and account activities to promptly identify and address any suspicious transactions. Follow the official websites and channels of the projects and exchanges you use to be aware of their latest news and updates. By incorporating these practices into your routine, you contribute to the overall resilience of the crypto community against emerging threats. Disclaimer: The opinions expressed in this article are for informational purposes only. This article does not constitute an endorsement of any of the products and services discussed or investment, financial, or trading advice. Qualified professionals should be consulted prior to making financial decisions.

The First Two Weeks of FTX Trial: Friends to Foes, Secrets Exposed

TL;DR: - Three close friends of SBF testified against him in court, suggesting he was the mastermind behind the collapse of FTX and Alameda. They said that SBF was actually aware of FTX and Alameda’s intertwined operations and misconducts, not a naive entrepreneur who “acted in good faith” as his defense lawyer claimed. - During this time, $400 million that had been stolen when FTX declared bankruptcy suddenly moved again. In the high-stakes courtroom drama surrounding Sam Bankman-Fried (SBF), a tale of shifting loyalties and surprising revelations has unfolded. Close allies of the former FTX founder and ex-CEO took the stand, and to the shock of many, they seemed to turn their backs on the man who was once at the helm of one of crypto's most prominent empires. The trial began with SBF's defense attempting to paint him as a visionary entrepreneur who had built billion-dollar companies from scratch. They called him "Sam" in a friendly, almost endearing manner, emphasizing his accomplishments. “Sam didn’t defraud anyone,” they stated. “Sam acted in good faith. [...] He didn’t steal any money.” But as the days unfolded, a different narrative began to emerge. When “Allies” Testified For the past two weeks, three of those who were once close to SBF were summoned to the stand. They included Adam Yedidia, a friend from MIT who had worked closely with SBF at FTX; Gary Wang, the former CTO of FTX and a co-founder of the crypto exchange; and Caroline Ellison, the former CEO of Alameda and SBF's girlfriend. Fragile Since June 2022 Yedidia's testimony revealed a pivotal conversation where SBF had admitted that FTX was "not bulletproof." This candid admission suggested that SBF was aware of the growing financial risks at the exchange, as Alameda at that time bore an $8 billion liability to FTX. This suggested that SBF was intimately aware of the vulnerabilities within FTX that could jeopardize the exchange's financial stability, despite his public claim in November 2022, “FTX is fine. Assets are fine.” Also, the statement suggests that SBF might have had knowledge of the financial risks posed by Alameda's activities within FTX. A Kingdom of Falsehoods Gary Wang probably provided some of the most damning testimony. He said that he was told by SBF to change a vital piece of FTX software code, enabling Alameda to obtain a staggering $65 billion credit line on FTX. This credit line was unlike any other, as no other customer had a credit line exceeding $1 billion. The code alteration allowed Alameda to maintain a negative account balance and essentially borrow money from FTX's unsuspecting customers. This revelation was a testament to the intricate maneuvers that transpired behind the scenes, involving not only Bankman-Fried but also other high-ranking FTX and Alameda executives. Additionally, Wang also revealed the inner workings of FTX's supposed safety net – its backstop insurance fund. This fund was designed to cover losses when a customer's position required liquidation. However, Wang's testimony painted a grim picture. He disclosed that the value of the backstop insurance on FTX’s website, was, in reality, a sham, providing a false sense of security to customers and investors. The revelation added another layer to the already complicated web of allegations surrounding FTX. Wang went so far as contradicting the rosy statements made by SBF. He bluntly asserted that "FTX was not fine, and assets were not fine." Secrets, Scandals, and Schemes Behind Closed Doors Caroline Ellison's testimony was nothing short of a gripping exposé into the world of intrigue and deception that revolved around SBF and his financial empire. Almost Too Much Creativity in Accounting One of the most startling aspects of Ellison's testimony was her account of the creative accounting tactics that had been employed to trick both Alameda’s investors and FTX’s users. Ellison revealed that she had resorted to manipulating balance sheets and using vague language to cover up Alameda’s risky financial situation and the enormous sums Alameda had siphoned from FTX. Astonishingly, by May 2022, Alameda had covertly withdrawn over $10 billion from the pockets of unsuspecting FTX customers. When questioned about why these illicit withdrawals were labeled as "FTX borrows," Ellison unflinchingly pointed to SBF as the mastermind behind this financial sleight of hand. She admitted that she was merely following orders from SBF, who had explicitly instructed her to avoid explicitly labeling it as "FTX customer money." Probably because of these creative accounting practices that Alameda had faced great difficulty in getting an audit. Despite various attempts to hire accountants throughout the years, they had encountered resistance, with auditors refusing to review Alameda's books. For an entity of that scale to record all of their dubious financial transactions on Google spreadsheets, it's no surprise that no auditor was willing to take on the job. Global Operations Gone Wrong Ellison's testimony took an even darker turn when she described the shocking details of FTX’s "extensive global operations" where deceit and unscrupulous tactics seemed to know no bounds, both geographically and ethically. According to Ellison, Alameda, under SBF's instructions, had devised many questionable schemes in an attempt to release capital that had been locked up in a money laundering investigation in China. Among numerous failed strategies, she detailed an unusual scheme involving paying Thai prostitutes to open accounts on certain exchanges, setting up trades through these accounts with the intention of depleting Alameda's China-based funds, and transferring the value to the accounts of these individuals, where Alameda could later recover them. When all had failed, SBF even tried to bribe Chinese government officials “in the ballpark of $100 million” so they would release the locked up capital. Furthermore, it was disclosed that FTX considered raising capital from none other than Saudi Arabian Prince and Prime Minister Mohammed Bin Salman in June 2022, when Alameda was in deep water. The mere idea of such a financial alliance hinted at the scale of FTX's operations and its then impact on international finance. A Culture of Deceit Shaped by Its Leader The former Alameda CEO recounted how SBF had normalized a culture of deceit within the organization as he had explicitly stated that lying and stealing money were permissible in his worldview. Over time, this permissive attitude towards deception had become an integral part of the environment she worked in. Since deception could not work in the light, Ellison discussed how SBF had cultivated a culture of secrecy among the higher-ups in the organization. This involved the use of encrypted messaging apps like Signal, with messages set to delete within a week, and a preference for in-person meetings. Executives also employed coded language, such as referring to "our Korean friend," which allegedly alluded to a backdoor used to siphon funds from FTX to Alameda. SBF had argued that this secretive behavior had been recommended by FTX's hired counsel. Ellison's testimony also brought to light her infamous "Things Sam is freaking out about" list, a Google document that she regularly updated. This document provided a window into SBF's growing anxieties, which included concerns about "bad press" coverage and a scheme to get regulators to crack down on rival Binance. This scheme was rooted in the belief that FTX could absorb Binance's customers, thereby addressing its own staggering $8 billion shortfall. The list served as a tangible record of the pressures and machinations that were at play behind the scenes. In sum, Caroline Ellison's testimony was an account of manipulation and deception that spanned both Alameda and FTX. Her revelations placed SBF squarely at the center of the alleged financial misconduct and painted a vivid picture of the world he had created within his house of cards. Stolen $400 Million Moved Amid Trial Coincidentally, during the first two weeks of trial, over $400 million that had been stolen from FTX on the day of bankruptcy began to move again. According to the blockchain analysis provider Elliptic, it is suggested that those responsible for laundering the money may have connections and a history related to cybercrime. Like many other crypto hackers, they funneled the stolen money through cryptocurrency "mixing" services to obfuscate the trail. Surprisingly, some of the funds were laundered through a service owned by FTX, adding a layer of complexity to the operation. Closing Thoughts The testimony from SBF’s once-close allies raised a cloud of suspicion around him, portraying him as the mastermind behind the alleged misdeeds. The spotlight shone on these individuals who, not long ago, were seen as smart, privileged, and full of potential. Now, they appeared to be painting a picture of themselves as individuals who merely acted as directed by SBF, as if they were not fully-fledged adults with their own agency and discernment. Their testimony revealed a surprising level of compliance to SBF, suggesting a lack of autonomy or even moral judgment in their actions. The blame is consistently placed on Bankman-Fried, as though his influence was so overwhelming that they couldn't resist his commands. This narrative raises questions about the extent to which personal responsibility and accountability should factor into the unfolding legal drama. As the trial is expected to continue until November, it becomes evident that the narrative was far from over, and more astonishing revelations may still be waiting to unfold. Several other high-ranking executives within FTX and Alameda, including Ryan Salame and Sam Trabucco, are on the list of potential witnesses. Source: Cointelegraph Disclaimer: The opinions expressed in this article are for informational purposes only. This article does not constitute an endorsement of any of the products and services discussed or investment, financial, or trading advice. Qualified professionals should be consulted prior to making financial decisions.

What Is Wash Trading?

Wash trading, also known as round-tripping, is a form of market manipulation done when an investor buys a financial instrument and sells it back to himself many times. This increases the instrument’s trade volume, creating the illusion that the asset is worth more than it actually is. Consequently, unsuspecting investors buy such assets only to realize they are not worth as much as they thought. While wash trading is done by an individual, round-tripping can be done by one person buying and selling the same security within the same trading day or by two companies selling securities to themselves and agreeing to repurchase them at about the same price. In this article, we’ll discuss wash trading, how it works, where it’s commonly used within crypto markets, and how to avoid falling prey to it. Working Principle of Wash Trading At a basic level, a wash trade is an investor buying and selling an asset at the same time. However, an actual wash trade goes further, taking into account the investor’s intent. Therefore, two conditions are generally met to confirm a wash trade. The first condition is intent. The wash trader must have had a specific strategy to buy and sell the same asset ahead of time. Again, wash trading is conducted in an effort to mislead. As a result, multiple accounts are needed to try to pull off the misrepresentation. The trader, or firm, will make transactions on the same asset but will use the different accounts to result in changed prices or increased trading volume. The account with the asset will sell the asset to another account of the wash trader. The second condition is the result. The result of the transaction must be a wash trade, where the investor has bought and sold the same asset at the same time, using accounts that have the same or common ownership. One way to determine if wash trading is taking place is by inspecting the financial position of the investor. If the trade doesn’t change the investor’s overall position or expose them to any type of market risk, then it can be considered a wash. A wash trade scenario Let’s assume we have a stock trader named Joe, and a brokerage firm colluding to rapidly buy and sell stock in the company ABC. The idea is that other investors will notice the activity on ABC stock, and will decide to invest in ABC. As these investors buy ABC, the price rises, and Joe profits from the rally. Then, “Joe” short-sells ABC stock, driving the price lower and profiting from the downward price trend. Wash trading has been suspected in cryptocurrencies, too, especially with regulators slow to regulate its existence. Back in 2017 and 2018, when blockchain projects would raise money via ICOs (initial coin offerings), the crowdfunding revenue could be recycled back to the exchanges to show a bolstered level of interest in the new project. For example, large investors within a crypto project, XYZ, might buy some more XYZ crypto from that project using multiple addresses. Once they’ve acquired additional XYZ, then they would transfer the same amount of XYZ to the exchanges. At that point, they would convert XYZ to Ether and use that Ether to buy more XYZ. This behavior would continue for some time, using multiple addresses in an attempt to disguise their intent. Outside investors would see the increased interest and volume in XYZ, then decide to buy into the project long-term. This additional interest from outside holders with long-term intent increases the price of XYZ. Then, the insider would sell some of their XYZ cryptos at a profit. In essence, the large investors of XYZ use wash trading to mislead others about the speculative interest in the project so they can eventually dump their holding at a profit. According to Chainalysis’ 2022 Crypto Crime Report, a significant amount of criminal activity was associated with NFTs in 2021. The two illicit activities related to NFTs include wash trading artificially increasing the value of an NFT and money laundering through the purchase of NFTs. How Does NFT Wash Trading Happen? If you’re an NFT creator, you’ll want a way for your NFT to stand out, so that people can buy it from you and you can profit. For this reason, wash trading has entered the NFT space. A wash trader would buy and sell their own NFT so that it will show inflated volume and interest and possibly a price increase. (The wash trader controls both the buy and sell prices so they can buy it at a higher price from themselves.) This behavior can be repeated over and over. As a result, outsiders seeing this increased activity might consider buying the NFT at an inflated price. Once the NFT is sold to an outsider, the NFT creator pockets the difference. Recently, Chainalysis completed research on this topic and found 110 wallet addresses that profited a combined $8.9 million from active wash trading. A pictorial example of a wash trade Is Wash Trading Legal? NO. The Commodity Exchange Act prohibits wash trading. Prior to its passage, traders commonly used wash trading to manipulate markets and stock prices. The Commodity Futures Trading Commission (CFTC) also enforces regulations regarding wash trading, including guidelines that bar brokers from profiting as a result of wash trading activity. The IRS also has rules regarding wash trades. These rules disallow investors from deducting capital losses on the taxes (from sales or trades of securities) that result from wash sales. For example, traders who are using wash trades in stocks to skip out on a tax bill will find themselves still owing the tax bill. However, the regulations for crypto have not caught up yet. The Securities and Exchange Commission (SEC) has been taking an interest in cryptocurrencies. However, NFTs are not considered securities, because they’re non-fungible and are outside the purview of the SEC. Likewise, the IRS considers crypto to be property, not securities. Until such time that the regulators figure out whose jurisdiction applies to overseeing crypto, there’s the risk of wash trading —and, therefore, of misleading price and volume data. How to Avoid Wash Trading Scam Wash trading is more prevalent in smaller and newer markets than in the larger, more established markets. This is because smaller markets are more easily manipulated. A big whale can easily move the market in small- or micro-cap crypto, as the size of their balance sheet can be comparable to the value of the crypto itself. With small-cap crypto, just buying and selling a little bit will trigger some bots to “wake up” and generate more volume in the market. Additionally, new coins that are added to the market won’t have any price or volume history attached. Therefore, developers or other insiders might engage in wash trading to mislead participants about the true value of the coin. That is why at bitget we introduced the Bitget Launchpad to mitigate this issue and ensure compliance with trading rules to prevent a wash trade. Many NFTs have no volume or interest in their trading. Therefore, NFT owners can easily engage in wash trading to lure unsuspecting buyers into purchasing the NFT at an inflated price. The best defense against wash trading is to avoid new issues, small-cap cryptos, and NFTs. To avoid being the victim of a wash trade incident, lean toward more established, larger volume cryptocurrencies. The larger the market is, the more funding is needed for nefarious players to manipulate the market. As you can imagine, this is extremely difficult to do in large markets like Bitcoin or Ethereum, which are worth hundreds of billions of dollars. The larger the crypto market cap, the more exchanges will be dealing in it. This effectively allows for better price discovery. For example, if one exchange is allowing wash trades, then arbitrageurs will siphon away any difference in pricing with other exchanges. The bigger the cryptocurrency, the more likely there will be several exchanges dealing in that market which allows arbitrage opportunities between the different venues to bring pricing back in line. Lastly, seek out those markets with an established track record of trading. That way, you can compare the volume of transactions now to that crypto’s history. This comparison will indicate whether extreme amounts of volume have entered the market, possibly misleading participants. Any good trader or investor will have a plan and a strategy for their trades. Having a process and repeatable method to enter into trades and positions coupled with a process for an exit strategy on the trade is what brings consistency to trade. In your trading plan, also be sure to consider the age and size of the cryptocurrency. NFT wash trading is sort of like a WhatsApp vendor sending you money to buy their products to make it seem like they’re making sales. In the case of NFTs, however, one person can easily finance multiple wallets they own to purchase their listed NFTs. To check the transactions an NFT has gone through on a marketplace like OpenSea, go to the item activity tab below the NFT, and you’ll see the details of how the NFT has been bought and sold from several addresses. For more information on the NFT, click the diagonal arrow under the date column, and it takes you directly to the blockchain on which that NFT exists. You can go further by looking into the individual activity of each address associated with the NFT. Disclaimer: All products and projects listed in this article are not endorsements, and are provided for informational purposes only. New to crypto? Subscribe to our social media today for more valuable insights! Twitter | Telegram | LinkedIn | Facebook | Instagram