Wash trading and insider sales in NFT markets

Shirui Wang, Nieyan Cheng and Tianyang Zhang

Journal of Banking & Finance, 2025, vol. 180, issue C

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.

Keywords: Non-fungible token; Wash trading; Insider sales; Financial misconduct (search for similar items in EconPapers)
JEL-codes: G14 G18 G19 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:180:y:2025:i:c:s0378426625001499

DOI: 10.1016/j.jbankfin.2025.107529

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