An investigative report by crypto analytics firm Solidus Labs shows that 56% of ERC-20 tokens were involved in insider trading when they first listed on the three top centralized cryptocurrency exchanges.
The report studied 234 ERC-20 token listing announcements from three of the world’s largest centralized trading platforms. According to on-chain data, 411 transactions in the scope of the investigation were related to more than 100 insiders.
Many entities use DeFi trading platforms to buy tokens before they are listed on CEX, and make a profit by selling these tokens after the listing is announced and the price increases. In total, the insiders are estimated to have profited around $24 million from the illicit transactions.
Solidus Labs co-founder Chen Arad said that if more than half of all tokens listed are not tokens that can be purchased in trust, then it is an inefficient market. This problem is one of the obstacles in taking cryptocurrency to the next level.