Insider trading (crypto)

The classic crypto case involves listings. An employee of an exchange who knows which token will be listed next can buy it beforehand and sell into the jump that often follows the announcement. Other sources of inside information include unannounced partnerships, hacks, token unlock changes, treasury sales and the outcome of governance or regulatory decisions known to only a few people.

Enforcement has caught up with the sector. In the US, prosecutors brought the first crypto insider trading case in 2022 against a former employee of a major exchange over trades ahead of listings, using wire fraud law. In the European Union, MiCA explicitly prohibits insider dealing and the unlawful disclosure of inside information for crypto-assets admitted to trading on an authorized platform, and issuers must publish inside information promptly.

Detection is easier than many assume, because blockchain records let investigators link wallets that bought just before announcements. Still, a large share of crypto trading happens on venues and tokens outside these regimes.