Journal of Banking & Finance 180, pp. 107529.
ISSN/ISBN: Not available at this time. DOI: 10.1016/j.jbankfin.2025.107529
Abstract: With the recent evolution of the cryptocurrency market, financial misconduct has become a major concern. Using on-chain data from the 500 most traded NFT (non-fungible token) collections, this study investigates wash trading in NFT markets. We first detect suspicious wash trades that form closed loops and then validate the prices of these trades using Benford’s Law. Excluding token-incentivized wash trades, we propose a conceptual model and argue that collusion between wash traders and insiders is the primary motivation of wash trading. Empirical analysis reveals that insiders tend to sell during or shortly after wash trading. This manipulation creates a pump-and-dump effect, causing losses for buyers during the pump phase. Our research reveals the underlying mechanisms of such misconduct and highlights the need for regulation in the cryptocurrency market.
Bibtex:
@article{,
title = {Wash trading and insider sales in NFT markets},
journal = {Journal of Banking & Finance},
volume = {180},
pages = {107529},
year = {2025},
issn = {0378-4266},
doi = {10.1016/j.jbankfin.2025.107529},
url = {https://www.sciencedirect.com/science/article/pii/S0378426625001499},
author = {Shirui Wang and Nieyan Cheng and Tianyang Zhang},
keywords = {Non-fungible token, Wash trading, Insider sales, Financial misconduct},
abstract = {With the recent evolution of the cryptocurrency market, financial misconduct has become a major concern. Using on-chain data from the 500 most traded NFT (non-fungible token) collections, this study investigates wash trading in NFT markets. We first detect suspicious wash trades that form closed loops and then validate the prices of these trades using Benford’s Law. Excluding token-incentivized wash trades, we propose a conceptual model and argue that collusion between wash traders and insiders is the primary motivation of wash trading. Empirical analysis reveals that insiders tend to sell during or shortly after wash trading. This manipulation creates a pump-and-dump effect, causing losses for buyers during the pump phase. Our research reveals the underlying mechanisms of such misconduct and highlights the need for regulation in the cryptocurrency market.}
}
Reference Type: Journal Article
Subject Area(s): Accounting