56% of ERC-20 tokens listed on three top centralized cryptocurrency exchange (CEX) platforms are suspected of being involved in insider trading, according to an investigation by cryptocurrency analytics firm Solidus Labs.
In its comprehensive report, Solidus Labs analyzed 234 ERC-20 token listing announcements from the world’s largest centralized exchanges. The findings, based on on-chain data, indicated that the 411 transactions within the scope of the investigation were linked to more than 100 insiders.
Many entities have purchased these tokens through decentralized finance (DeFi) platforms before they were listed on the CEX platform, and then took advantage of the price surge by selling them after the listing was announced. In total, the individuals involved are estimated to have earned approximately $24 million from these illicit transactions.
Chen Arad, co-founder of Solidus Labs, emphasized that if more than half of the listed tokens cannot be purchased through trusted means, it will create market inefficiency. This problem is one of the hurdles in taking cryptocurrencies to new heights.
Survey conducted by Solidus Labs has revealed worrying practices in the cryptocurrency ecosystem. Insider trading, a phenomenon traditionally associated with traditional financial markets, appears to have permeated the digital asset space. The revelation raised questions about the integrity and fairness of token listings on centralized exchanges.
Regulators and industry players have long grappled with the challenge of ensuring a level playing field in the cryptocurrency market. The decentralized nature of cryptocurrencies, combined with the lack of a comprehensive regulatory framework, makes it difficult to prevent market manipulation and illegal activities.
The Solidus Labs report sparked calls for greater transparency and regulation in the cryptocurrency industry. Market participants urged exchanges to implement stricter compliance measures and strengthen due diligence procedures to prevent insider trading.
In addition, regulators are called on to establish clearer guidelines and oversight mechanisms to protect investors and maintain the integrity of the digital asset market.