Market Analysis

New research claims 21 accounts pumped the $4.4B EOS ICO with wash trades

New research asserts that EOS and ETH were wash-traded on exchanges to manipulate prices during EOS’s multi-billion dollar ICO.

New research has shed more light on the crypto industry’s largest-ever token sale, alleging that foul play may have been afoot during EOS’s initial coin offering (ICO) four years ago.

Researchers from the University of Texas have raised fresh concerns regarding Block.one’s record $4.362 billion ICO for the EOS blockchain in 2017 and 2018. The highly-anticipated project was backed by industry heavyweights including PayPal co-founder Peter Thiel alongside billionaire hedge fund managers Alan Howard and Louis Bacon. The research does not accuse Block.one itself of any wrongdoing and the company has cited a report stating there was no evidence it was involved.

On Aug. 31, Professor John Griffin of the Austin McCombs School of Business and financial analysis firm Integra FEC published their findings in a paper titled “Were ETH and EOS Repeatedly Recycled during the EOS Initial Coin Offering?” — alleging that wash-trading played a key role in EOS’s price discovery. Bloomerbe

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According to the paper and outlined in an investigation by Bloomberg, EOS was allegedly wash-traded on the Binance and Bitfinex cryptocurrency exchanges in an effort to artificially inflate the prices. Wash-trading describes the process where an entity simultaneously acts as the buyer and seller at the same asset to artificially bolster volume or manipulate prices.

Griffin wrote that artificial demand from suspect accounts created the illusion of demand for the token and pushed prices up:

According to Bloomberg, Block.one responded to the paper by referencing a July document authored by law firm Clifford Chance LLP that asserted there was “no evidence that Block.one purchased tokens on the primary market.”

Related: Startup Darling EOS Cashes In Millions Of ETH As ICO Scorn Continues

The same John Griffin published a paper in October 2019 titled “Is Bitcoin Really Un-Tethered?” that claimed the leading stablecoin Tether (USDT) was wash traded to influence Bitcoin prices during the 2017 bull market. Speaking to Cointelegraph in Feb. 2020, the firm behind Tether, iFinex, labeled the claims “reckless and false.”

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Manipulation or otherwise, EOS has largely fallen out of favor with crypto traders and investors. Since ranking among the top five crypto assets by market cap in mid-2018, EOS has since tumbled to rank 35th by capitalization.

The token currently trades for $5, down 77% from its April 2018 all-time high of $22.70.

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