$500M CryptoPunk sale was just wash trading, because of course it was

A CryptoPunk NFT that 'sold' for more than $500 million and then put up for $1 billion at auction has been outed as nothing but wash trading.

A wild-haired, black lipstick-sporting CryptoPunk that apparently sold for more than $500 million worth of Ether was actually just wash traded.

The saga of CryptoPunk 9998 started on Thursday when somebody transferred the pixelated artwork between Ethereum addresses, reports Bloomberg.

Less than two hours later, the Punk’s new address moved it on again, selling it for 124,457 ETH ($532 million). All of the funds were apparently borrowed, primarily from Compound.

However, the merry-go-round didn’t stop there.

The ETH spent on the piece was transferred to the seller then sent straight back to the buyer to repay the loan used to buy the female Punk in the first place.

CryptoPunks shot NFTs into the zeitgeist earlier this year.

Then, as if all this wasn’t suspicious enough, the Punk itself was transferred back to its original address. It was promptly put up for sale again for more than $1 billion.

CryptoPunk creator Larva Labs addressed the ‘sale’ on Twitter, pegging it as a flash loan.

“This transaction (and a number of others) are not a bug or an exploit, they are being done with ‘flash loans,'” the company tweeted.

“In a nutshell, someone bought this punk from themself with borrowed money and repaid the loan in the same transaction.”

The company also revealed that other large bids have also been made like this. But, it said while they’re briefly valid, bids like this cannot be accepted.

Larva Labs then claimed it would add filters to avoid these types of situations going forward.

Beyond CryptoPunks, wash trading is common in crypto

Wash trading is when a trader buys and sells an asset with the intention of misleading and manipulating the market.

This can include buying and selling something for vastly inflated prices to skew its perceived value and demand.

[Read more: OpenSea bans insider NFT trading after scandal — four years too late]

Which is why CryptoPunk 9998 has raised a few eyebrows, not least those of Tyler Gellasch’s, an attorney who had a hand in writing 2010’s Dodd-Frank Act.

Earlier this year, crypto exchange Coinbase was fined $6.5 million after regulators found it recklessly pitted two trading algorithms against each other — artificially boosting crypto prices with fake trades.

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