Alex Kruger, an economist and cryptanalyst, recently discovered that one user of the Korean exchange Bithumb has been creating $250 million in “fake volume” on the exchange every day since August 25th.
The fact is that the Bithumb exchange offers users up to 120% refund of transaction fees through airdrops on a first-come, first-served basis. The daily limit on refunds is 1 billion Korean won (about US$900,000). Therefore, by trading on the exchange for a certain amount, you can earn money on returns every day.
Bithumb collects fees by charging 0.15% of the value of each transaction on its platform. This allows users to earn 0.18% return on all transactions carried out through the exchange.
If the user transacts with himself, he will receive double the return, i.e. 0.36%.
This can be done by “trade washing” by “entering two opposing limit orders.” Therefore, the total fees charged by both traders (by the same user) will be 0.3%. After receiving a refund of 120% of all commissions, this will give a 0.36% discount on all these transactions. And if one user wants to take back the entire billion Korean won in refunds, he can do so through the above scheme. However, to carry out such trading, which is illegal in most cases, such a user must have a trading volume of 278 billion Korean won (about $250 million).
According to Kruger, since last week, such trading has been carried out by one of the users every day, causing the exchange's trading volume to increase by an artificially created amount of $250 million every 24 hours. Since the South Korean exchange offers refunds to the first comer, the user trades only enough to get the full refund amount. Kruger posted a graph that shows this user starting to transact 31,000 Bitcoin (KRW 252 billion) and other coins worth KRW 26 billion every day at 11 a.m.
Kruger also notes that the Bithumb exchange is running a rather “expensive marketing campaign.” And traders who carry out artificial trading, after deducting trading commissions, can earn up to $150,000 per day and a total of $4.5 million during the entire period while such a return system is in effect.
According to cryptoglobe.com
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