Market Manipulation

Market manipulation encompasses illegal practices that artificially interfere with the free and fair operation of markets by distorting prices, trading volumes, or market information to deceive other participants or gain unfair advantage.

Common manipulation techniques include wash trading (self-dealing to create false volume), spoofing (placing orders intended for cancellation to move prices), pump and dump schemes (coordinated buying to inflate prices followed by selling), cornering (accumulating positions to control supply), and dissemination of false information to influence prices. Manipulation undermines market integrity, harms investors who trade based on false signals, and destroys confidence in fair price discovery.

Crypto markets face endemic manipulation due to fragmented liquidity, limited regulatory oversight, prevalence of thinly traded tokens, and ease of coordinating schemes through social media. The SEC and CFTC have brought enforcement actions against crypto manipulation including coordinated telegram pump groups, influencer-driven schemes, and exchange operators facilitating wash trading. Unlike traditional securities markets with robust surveillance and strict market conduct rules, many crypto exchanges operate outside comprehensive regulatory frameworks, though MiCA and evolving national regulations increasingly impose market abuse prohibitions comparable to traditional finance. Blockchain transparency paradoxically facilitates both manipulation detection through on-chain analysis and coordinated manipulation execution through pseudonymous addresses.