We show that ironically, despite the use of advanced cryptography, digital assets such as cryptocurrencies are highly susceptible to theft. Analyzing every known hack and theft from centralized cryptocurrency exchanges, we show that over $5 billion has been stolen from cryptocurrency exchanges...

We show that exchange traded funds (ETFs) are used in a new form of insider trading known as “shadow trading.” Our evidence suggests that some traders in possession of material non-public information about upcoming M&A announcements trade in ETFs that contain the target stock, rather than...

Using comprehensive global data, we find that introducing a closing auction in stock markets to set closing prices typically improves liquidity, price efficiency, and market integrity. However, auction design matters -- price stabilization features and randomized closing times make auctions more...

We show that a type of market manipulation popularized in cryptocurrency markets is now also found in stock markets, an effect we term “crime contagion”. Manipulators gather traders in pseudo-anonymous online forums (e.g., Telegram) where they co-ordinate pump-and-dump attacks on stocks,...

A new market design, an “Automated Market Maker” (AMM), completely automates trade matching and liquidity provision by leveraging decentralized finance technologies including smart contracts. Can AMMs improve the trading of traditional assets? We derive a model of an AMM’s equilibrium...

Decentralized exchanges (DEXs) are gaining popularity, allowing investors to trade cryptocurrencies through liquidity pools. We find that about 44% of major DEX liquidity pools are scams, resulting in approximately $1.5 billion in investor losses. Scammers display specific traits, including...

Layering and spoofing are among the fastest growing market manipulation techniques, involving placing non-genuine orders into a market to deceive other traders. We develop empirical techniques to detect this prohibited trading. Using a comprehensive, global sample of prosecuted cases and...

Given that corporate managers use stock prices as signals when making investment decisions, does market manipulation distort this process and impact corporate investment? We find that the increased prevalence of stock price manipulation has an economically meaningful negative effect on firms’...

As trading in the dark serves an important part of total trading activities nowadays, how is the real economy impacted? We find that dark trading contributes to the corporate investment environment through the production of new information for managers. This leads to an increased managers’...