Can AI Detect Wash Trading? Evidence from NFTs

• URL: http://arxiv.org/abs/2311.18717v3
• Date: Sun, 02 Mar 2025 19:50:01 GMT
• Title: Can AI Detect Wash Trading? Evidence from NFTs
• Authors: Brett Hemenway Falk, Gerry Tsoukalas, Niuniu Zhang,
• Abstract summary: We find that 38% (30-40%) of trades and 60% (25-95%) of traded value likely involve manipulation.<n>This direct evidence enables a critical reassessment of existing indirect methods.<n>We develop an AI-based estimator that integrates these regressions in a machine learning framework.
• Score: 1.4678959818041633
• License: http://creativecommons.org/licenses/by-nc-sa/4.0/
• Abstract: Existing studies on crypto wash trading often use indirect statistical methods or leaked private data, both with inherent limitations. This paper leverages public on-chain NFT data for a more direct and granular estimation. Analyzing three major exchanges, we find that ~38% (30-40%) of trades and ~60% (25-95%) of traded value likely involve manipulation, with significant variation across exchanges. This direct evidence enables a critical reassessment of existing indirect methods, identifying roundedness-based regressions \`a la Cong et al. (2023) as most promising, though still error-prone in the NFT setting. To address this, we develop an AI-based estimator that integrates these regressions in a machine learning framework, significantly reducing both exchange- and trade-level estimation errors in NFT markets (and beyond).

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