Regulators Take Notice as Bragging Crypto Derivatives Traders Get Caught
US-based crypto intelligence firm Inca Digital, which collaborates with the US Commodity Futures Trading Commission, confirmed an open secret that, despite restrictions, crypto derivatives traders from the US and multiple other countries are able to access a number of restricted platforms.
"According to the model’s estimate, most of the users that are supposed to reside in the United States, United Kingdom, and Turkey, are showing other locations in their bio," the firm said in a report today.
Among other things, they found tweet patterns that include profit and loss (PNL) proofs, a specific screenshot that displays a derivatives trade execution, a referral link posting, and tweets mentioning a UID (trader’s unique identifier) along with a support request.
"PNL proofs and the associated screenshots are meant to brag, showing a derivatives trader’s successful trades," they said.
The team worked with a sample of 2,939 unique Twitter users engaged in derivatives trading on FTX, Huobi Futures, Binance Futures, OKEx, Bybit, Bitfinex, and BitMEX - identifying the locations of 2,164 traders globally, and 372 from the United States specifically.
Most popular locations of derivatives exchange users according to Twitter API data include the US, Indonesia, Turkey, India, and the UK respectively.
The most popular exchanges in the US are FTX, ByBit, and Binance, respectively, followed by OKEx, Bitfinex, Huobi, and BitMEX.
Meanwhile, ByBit has the largest share of the identified derivatives traders in general, followed by FTX and Binance.
Inca Digital’s Investigation Team said they leverage a variety of Natural Language Processing (NLP) techniques that can produce reliable datasets based on the digital footprint of crypto users. They take derivatives traders operating on the major derivatives venues and "try to show that their geographic locations are far more diverse than what is claimed by the exchange operators and is allowed by local securities regulations."
One of the three methods used to arrive to the above-given data includes "extensive speech sample collection and state-of-the-art multi-language Geographical Named Entity Recognition [NER] models." By running hundreds of tweets of each of the identified users through their models, NER geotagged 2,079 out of 2,939 derivative traders. These geotags can be aggregated to predict the true residency of a derivatives trader, said the report, regardless of the statements they made during their know-your-customer (KYC) onboarding process.
Again, per this method, the number one spot is taken by the US, followed by Turkey, Indonesia, India, and the UK, respectively.
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