This chapter zeroes in on two prevalent forms of market manipulation: wash trading and pump-and-dump schemes.
Market manipulation remains a persistent and evolving challenge in the cryptocurrency sector, particularly in decentralised finance (DeFi). The Market Manipulation chapter of the 2025 Crypto Crime Report sheds light on two widespread forms of manipulation — wash trading and pump-and-dump schemes — by leveraging on-chain data analysis to track suspicious activity patterns. While the study does not attempt to estimate victim losses, as this requires off-chain data, it serves as an essential starting point for identifying fraudulent practices.
By examining blockchain transactions, the report uncovers how bad actors exploit the transparency of DeFi markets to mislead investors and artificially inflate token values. The findings highlight the urgency of improved detection measures and coordinated efforts to mitigate these manipulative tactics.
The Persistence of Wash Trading in DeFi
Wash trading, a form of market manipulation in which an entity repeatedly buys and sells the same asset to create the illusion of heightened demand, has long been associated with centralised exchanges (CEXs). Both platforms and traders have been known to inflate trading volumes to attract users or climb exchange leaderboards.
Despite the added cost of gas fees, wash trading remains prevalent in decentralised exchanges (DEXs) as well. The study employs two key heuristics to detect wash trading in DeFi markets:
- Matched Buy and Sell Heuristic:
- Identifies trades where an address executes a buy and sell transaction within 25 blocks (approximately five minutes).
- Ensures that the volume difference between trades is minimal (less than 1%), suggesting no meaningful profit motive.
- Requires at least three such trades by the same address to confirm a pattern.
Using this method, researchers identified $704 million in suspected wash trading across Ethereum, BNB Smart Chain, and Base in 2024. Although this represents only 0.035% of the total DEX trading volume, the activity was concentrated in specific pools, with some addresses executing thousands of transactions in rapid succession.
- Disperse-Based Detection Heuristic:
- Focuses on addresses that use multi-sender tools to distribute funds across multiple wallets.
- Flags cases where five or more addresses, controlled by a single entity, engage in wash trading.
This approach uncovered $1.87 billion in wash trading volume, bringing the total suspected volume across both heuristics to $2.57 billion.
A notable case study highlights how bots, such as those offered by Volume.li, facilitate wash trading.
This service, implicated in artificially inflating token trading volumes, generated an estimated $257.5 million in fake trading activity. The bots, purchasable for as little as $50, enabled traders to simulate high demand, misleading unsuspecting investors.
Pump-and-Dump Schemes in Token Markets
Alongside wash trading, the report identifies pump-and-dump schemes as another significant form of market manipulation in crypto. The ease of token creation has led to an explosion of new projects, many of which are abandoned shortly after launch.
In 2024 alone, over 3 million tokens were introduced, with 1.29 million listed on a DEX. However, only 1.7% of these tokens have remained actively traded in the last 30 days, suggesting that many were created for speculative or fraudulent purposes.
Pump-and-dump schemes operate by hyping up a token, drawing in unsuspecting investors, and then selling off holdings at an inflated price—causing the token’s value to plummet. Often, wash trading is used in the early stages to generate the illusion of organic interest.
The study identifies key indicators of pump-and-dump schemes:
- An address provides liquidity for a token and later removes at least 65% of the pool’s liquidity, valued at $1,000 or more.
- The token’s liquidity pool, previously active, becomes abandoned.
- At least 100 transactions occurred in the pool before the liquidity removal.
Using this method, researchers found that 4.52% of all tokens launched in 2024 exhibited suspicious pump-and-dump characteristics. Alarmingly, in 89% of cases, the same address that created the liquidity pool was responsible for abandoning it, indicating premeditated fraud.
The average lifespan of such tokens before abandonment was 6.51 days, with some lasting only a few hours. These schemes highlight the speculative and often high-risk nature of many new crypto projects.
The Ongoing Challenge of Crypto Market Manipulation
Market manipulation in crypto is a growing concern, exacerbated by the industry’s pseudonymity and lack of comprehensive regulation. While DeFi offers transparency through on-chain data, this same transparency is exploited by manipulators who leverage advanced tactics to avoid detection.
Identifying manipulation requires sophisticated analytical tools and heuristics, as seen in this report. However, these methods are not foolproof, and bad actors continuously adapt their strategies. Moreover, on-chain analysis alone is insufficient, as intent and off-chain coordination play a crucial role in fraudulent schemes.
Regulators, analysts, and industry participants must adopt a coordinated approach to combat these deceptive practices. While blockchain transparency provides valuable insights, cross-referencing on-chain data with external intelligence—such as social media activity, promotional campaigns, and financial records—will be essential in identifying and preventing fraud.
Conclusion
The findings from this latest report confirm what many in the crypto industry have long suspected—market manipulation is rampant, and wash trading and pump-and-dump schemes remain key methods of deception. The scale of manipulation, with billions in suspected fraudulent trade volume, underscores the need for more robust detection mechanisms.
As DeFi continues to evolve, so too will the tactics used by malicious actors. Combating these challenges requires vigilance, collaboration, and continuous innovation in on-chain analytics. Only through such efforts can the crypto market move towards greater transparency, fairness, and long-term sustainability.
Read the full report here.
