Wash Trader Generates Fake Daily Volume of $250,000,000 on Bithumb

2018-9-6 16:59

The buy-sell-rinse and repeat cycle of wash trading has bitten a prominent South Korean exchange as an economist and cryptoanalyst named Alex Kruger has discovered the daily fake volume is $250 million.

One highly active wash trader increases the volume by $250 million every day on Bithumb, South Korea’s largest crypto exchange. He is likely using a promotional offer from the exchange to his advantage and could be defrauding the exchange of $90,000 in one day.

Economist Reveals a Wash-trader’s Malicious Scheme

On Sunday, Kruger exposed the modus operandi of the wash trader in a series of tweets. The trader reportedly begins his trade at 11 am Korean Time every day. Active since August 25, the trader is making use of the exchange’s promotional offer that provides up to 120% payback on all trading fees. The daily limit on this payback is $900,000. This amount is paid to the users via airdrops on a “first come first served basis.”

Kruger went on to explain the math behind the fraud. Bithumb collects a 0.15% trading fee on the value of each trade. With a 120% payback offer, a trader received 0.15x 120% or 0.18% payback on his trades. This is where a wash trader’s advantage kicks in.

In wash trading, a user is trading with themselves. They are paying a 0.15% fee for selling a cryptocurrency and 0.15% fee for buying the same number of currency. Due to the promotion, they receive a 0.18% payback on both orders, shooting up their gains to 0.36%. Therefore, a wash trader receives twice as much benefit from the exchange without making any changes to his initial coin holding.

Could One User Be Getting All the Payback?

The rebate for the promotional offer is 1 billion won, and technically, the wash trader in question can get it all. To do this, the user has to trade 278 billion Korean won, equivalent to $250 million, every day. Interestingly, this is the same amount that the wash trader deals in, thereby injecting $250 million of fake volume in the exchange every day.

He can take advantage of the system as the amount is given on a “first come, first served” basis. The user trades 31,000 Bitcoin worth 252 billion won every day at exactly 11 am. An additional 26 billion won is traded in other coins. Kruger also noted that $4.5 million could be earned during the promotion’s entire timeline.

Wash Trader Generates Fake Daily Volume of $250,000,000 on Bithumb was originally found on [blokt] - Blockchain, Bitcoin & Cryptocurrency News.

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