New research has shed more light on the crypto industry’s largest token sale, claiming that foul play may have been going on during EOS’s initial coin offering (ICO) four years ago.
Researchers from the University of Texas have raised new concerns regarding Block.one’s record $ 4.362 billion ICO for the EOS blockchain in 2017 and 2018. The long-awaited project was backed by industry heavyweights, including PayPal co-founder Peter Thiel, along with billionaire hedge fund managers Alan Howard and Louis Bacon. The investigation does not accuse Block.one itself of any wrongdoing and the company has cited a report stating that there was no evidence that it was involved.
On August 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 initial EOS coin offering? ” – alleging that the laundry trade played a key role in EOS’s price discovery. Bloomerbe
According to the newspaper and outlined in an investigation by Bloomberg, EOS was reportedly traded on the Binance and Bitfinex cryptocurrency exchanges in an effort to artificially inflate prices. Wash-trading describes the process in which an entity acts simultaneously as buyer and seller of the same asset to artificially boost volume or manipulate prices.
Griffin wrote that the artificial demand for suspicious accounts created the illusion of demand for the token and pushed prices up:
“First, it directly manipulated the offer price of EOS up through the additional purchase and inflated the market value of the token. Second, it created the false impression of the token’s value that lured others to want to buy the token from ICO. “
The investigation allegedly identified 21 accounts that recycled EOS tokens during the ICO. The funds identified as suspicious amounted to 1.2 million ETH worth around $ 815 million at the time. Ether was the only cryptocurrency used to buy EOS during the year-long ICO.
The analysis claims that Ethereum accounts were created to buy EOS repeatedly over time. It states that a “significant portion” of the Ether collected during the token sale appears to have been “recycled by transferring ICO contributions through a series of obfuscating intermediary accounts and eventually reaching Bitfinex.”
“2,895 million Ether ($ 1,721 billion USD), or 39% of the Ether raised in the crowdsale, was also traced from the ICO crowdsale wallet to Bitfinex.”
Griffin did not identify the account owners or point a finger at Block.one regarding the alleged laundering exchange, but noted: “These suspicious accounts accounted for nearly a quarter of EOS purchases at the end of the crowdsale.” .
Cornell Law School law professor Robert C. Hockett said he worked for more than a month on the story in conjunction with news outlet Bloomberg, which published its findings on Sept. 2.
I worked with friends at Bloomberg for a month on this one. Pretty remarkable story. The vulgar securities scandals prior to 33 are apparently being crudely recapped in the crypto space now. https://t.co/Ogu5nSf6oF
– Robert Hockett (@ rch371) September 2, 2021
According to Bloomberg, Block.one responded to the document by referencing a July document written by the law firm Clifford Chance LLP that claimed that “there was no evidence that Block.one bought tokens on the primary market.”
Related: Startup Darling EOS cashes in millions of ETH as ICO Scorn continues
John Griffin himself published a paper in October 2019 titled “Is Bitcoin really untethered?? “which claimed that leading stablecoin Tether (USDT) was laundered to influence Bitcoin prices during the 2017 bull market. Speaking to Cointelegraph in February 2020, the company behind Tether, iFinex, qualified the claims as “reckless and false”.
Manipulation or otherwise, EOS has largely fallen out of favor with cryptocurrency traders and investors. Since ranking in the top five cryptoassets by market cap in mid-2018, EOS has fallen to 35th by capitalization.
The token is currently trading at $ 5, down 77% from its April 2018 all-time high of $ 22.70.