GroveCoin: Falsifying Volume & Holders for Exchange Listings
TL;DR:
- Most of GroveCoin’s volume on both centralized and decentralized exchanges has been faked (i.e., artificially inflated) by the team.
- In addition to significant wash trading on tier-2/3 centralized exchanges, GroveCoin has engaged in schemes to artificially inflate its number of holders and trading volume on decentralized exchanges.
- Based on an analysis of two insider wallets, we estimate that the Grove team has artificially inflated the number of holders by over 20,000.
- Through the use of an insider trading scheme, we estimate that the Grove team has artificially inflated its daily trading volume by 430%.
- These tactics are often used as an attempt to deceive larger centralized exchanges, like Binance, into believing there is sufficient demand for a listing.
Introduction
Wash trading on centralized exchanges is a well-known problem in the crypto space. We have shown that GroveCoin is one of the worst offenders of artificially inflating centralized-exchange trading volume through market-maker wash trading.¹
However, less has been documented about manipulative trading on decentralized exchanges. This article will highlight the approaches GroveCoin uses to artificially inflate holder counts and on-chain trading volume.
Laundering GRV via Gate.io
Before we discuss how the team fraudulently inflates the number of Grove holders and trading volume, let us first look at how Grove uses Gate.io to launder funds from insider wallets, including the Grove Fee Receiver wallet.
In preparation for the February 2nd, 2023 start of trading of GRV on Gate.io, the GroveCoin contract owner² transferred 667,497 GRV tokens to Gate.io (see red box below).
After the initial GRV transfers, there were no other transfers of Grove to Gate.io by any wallet until February 21, 2023, at which time the GroveCoin Fee Receiver wallet³ transferred 174,800 additional GRV tokens to Gate.io (see blue box above).
After the GroveCoin Fee Receiver wallet transfers, we do not see any transfers of GroveCoin to Gate.io until April 9th, 2023 (see yellow box above).
The transfers that occurred on April 9th appear to come from many different wallets. However, upon review, it is clear that these wallets are all connected to the Grove team.
Of note, the transfers all occur within a few minutes of each other on each day (sample of the transfers from April 10th to April 16th):
- April 9th:13 transfers of GRV to Gate.io between 10:14 and 10:34 UTC
- April 10th: 13 transfers of GRV to Gate.io between 10:07 and 10:38 UTC
- April 11th: three transfers of GRV to Gate.io between 10:46 and 10:58 UTC
- April 16th: four transfers of GRV to Gate.io between 10:23 and 10:38 UTC
Many of the wallets appear to transfer funds from other centralized exchanges to Gate.io.⁴ However, we also find many connections to known insider wallets, including the Grove marketing wallet, JohnG’s personal wallets, and the Grove Fee Receiver wallet. Here is one example of GroveCoin laundering funds from the Fee Receiver wallet through Gate.io:
From the above, we see how Grove uses multiple transfers to hide the source of funds moving to Gate.io. Starting from the bottom and working our way up:
- Transfer 1: GroveCoin Fee Wallet transfers 57,000 GRV tokens to wallet beginning 0xd7c.
- Transfer 2: Wallet 0xd7c transfers 54,150 GRV tokens to wallet 0x59ed.
- Transfer 3: Wallet 0x59ed makes nine separate transfers to wallet 0x0717 totaling 40,369.21 GRV tokens.
- Transfer 4: Wallet 0x0717 transfers 40,369.21 GRV tokens to Gate.io
It is important to understand that moving on-chain funds to a centralized exchange, and then distributing to different on-chain wallets, is a technique for laundering funds. The centralized exchange is the only one (aside from the account owner) who can see where the funds originated and where they were dispersed.
Over the course of 40 transfers, Grove transferred 1,595,427 GRV tokens to Gate.io.
Between March 15, 2023 and April 9th, the Grove team transferred approximately 85,000 GRV tokens from Gate.io to wallet 0x7a2f904144f58f45ed9a8689e708d2719ea79c05 (herein referred to as “Manipulator Wallet 1”). The Grove team also transferred 117,000 GRV tokens to Manipulator Wallet 1 from another known insider wallet (we will come back to this wallet later):
In the next section, we will discuss how tokens within Manipulator Wallet 1 were used to dramatically and artificially increase holder counts and on-chain trading volume in GRV.
On-Chain Volume and Holder Count Manipulation
Having sent approximately 200,000 GRV tokens to Manipulator Wallet 1, Grove insiders executed two schemes to artificially inflate the number of holders and on-chain trading volume:
- Scheme 1 — Inflate Number of Holders: use a multi-sender app to distribute small amounts (under 10 GRV) to thousands of wallets
- Scheme 2 — Inflate On-Chain Trading Volume: send larger amounts of tokens to a small group of wallets that will regularly buy and sell GRV tokens
Scheme 1: Artificially Inflate Number of Holders
Grove’s first round of artificially inflating the holder count occurred on March 20, 2023 and used the multi-sender “simple” method. Using the MCT multi-sender, Grove sent 1 GRV to 800 new wallets from Manipulator Wallet 1.
On the same day, Grove executed another multi-sender transfer and increased the holder count by another 200.
Perhaps concerned that sending one GRV to many wallets within a single multi-sender transaction was too obvious, on March 30th, Grove began using the “expert” mode of the multi-sender app and executed a series of non-uniform, multi-sender transfers.
Between 7:06 and 7:17 UTC, Grove sent 8,091 GRV tokens to 1,790 wallets. Humorously, all of the amounts sent had a decimal of X.03654.
Apparently happy with the results, the Grove team began repeatedly deploying the multi-sender to artificially inflate holder numbers. Within two weeks, Grove sent trace amounts of GRV tokens to 5,890 wallets, dramatically increasing Grove’s holder count (all sent amounts were less than 10 GRV).
Manipulator Wallet 2
In the Laundering section, we mentioned that another wallet also sent tokens to Manipulator 1. The Grove team transferred 117,000 GRV tokens from 0x25d88b958b3f534af345b3d80e50a9b5dc7a925a (herein referred to as “Manipulator Wallet 2") to Manipulator Wallet 1.
Manipulator Wallet 2 is a known insider wallet. It received 243 Trillion GVR tokens from the Grove contract owner on April 14, 2022 and has many interactions with other known insider wallets.
Blockchain activity shows that, from April 3rd to April 9th, 2023, the Grove team used Manipulator Wallet 2 to send trace amounts of GRV tokens to 14,540 unique wallets.
From on-chain data, we are able to visually see Grove’s holder count history. After the new contract was launched, we see an initial spike in the number of holders as investors converted their Grove to the new token contract. However, after the initial jump, the holder count flattened out. Not until March 20, 2023 did we see the first material movement, as the Grove team began to execute their scheme to artificially inflate the number of holders.
Aggregating the multi-sender transactions from Manipulator Wallets 1 and 2, we find that Grove artificially increased its holder numbers by over 20,000 (i.e., close to half of Grove’s holders are from these two wallets alone).
Scheme 2: Artificially Inflating On-Chain Trading Volume
At the end of February, 2023. Lynn Scraggs documented Grove’s miniscule on-chain trading volume.
With volume numbers already low and trending lower, Grove began working on a scheme to deceive investors and exchanges into thinking that trading volume was increasing.
On the same day Grove initiated its first transfer of GRV from Gate.io to Manipulator Wallet 1, it sent 0.4 BNB and 2,000 GRV to 11 different wallets.
Once received, each wallet immediately began selling and buying GRV tokens to inflate Grove’s trading volume. The following is a snapshot of one such wallet’s recent activity on GroveSwap:
From the above, we can see ongoing buying and selling used to inflate trading volume.
Not only did the wallets that received Grove and BNB from Manipulator Wallet 1 artificially inflate trading volume, Manipulator Wallet 1 itself also engaged in the same activity.
Similar manipulative activity was also found on PancakeSwap.
It appears that this activity is being executed programmatically. Several of the wallets seeded by Manipulator Wallet 1 have multiple and repeated failures when attempting to execute swap transactions.
In total, we found 160,050 GRV tokens sent from Manipulator Wallet 1 to 57 different wallets that were used to artificially inflate trading volume.
Since the start of the manipulation on March 15, 2023, GroveCoin’s daily traded volume has increased a reality-defying 430%.⁶
Concluding Remarks
Using Manipulator Wallet 1, Grove artificially inflated the number of holders by 5,890. Using Manipulator Wallet 2, the Grove team fraudulently increased the number of holders by another 14,540. With over 20,000 fake holders, close to 50% (and possibly more) of Grove’s holders are fake.
For the two weeks prior to March 15th, the average daily traded volume on GroveSwap was less than 20,000 GRV. Since it began its volume manipulation scheme, trading volume has averaged over 100,000 GRV daily (i.e., over 5X increase).
Sadly, these manipulative schemes not only deceive current and potential investors into buying or holding, the jump in artificial trading volume induces arbitrage bot activity. Price discrepancies across decentralized exchanges allow bots to buy low on one decentralized exchange and sell high on another. This activity ultimately hurts investors, as it allows bots to extract BNB from the aggregate LP.
Not only is Grove able to manipulate the holder count and trading volume, it is also able to directly manipulate the price of GRV. Leading into a JohnG AMA or “major” product announcement, we see upside manipulation. Conversely, shortly after a JohnG AMA or “major” product announcement, we see downside manipulation. This fraudulent scheme is used to induce FOMO and create a false pump in preparation for insider profit taking.
Appendix
Credit
@RoelL93789592, @NoValhalla4You, @beta_syndicate, and @PaulWat86321102 all identified this manipulative activity when it started and notified the community.
Additional credit to an unnamed yet invaluable source for his ongoing technical consultation and insight.
Endnotes
- Twitter posts by Lynn Scraggs illustrating that the vast majority of Grove’s trading on centralized exchanges is from wash trading:
“https://twitter.com/LynnScraggs/status/1630314497977008128”
“https://twitter.com/LynnScraggs/status/1630249302714126336”
2. Wallet 0xdbc0eef081dec6630be67989009e0ade58274477 is the GroveCoin contract Owner
3. Wallet 0x74617adab181e6513467a09147f141bfaae6f071 is the GroveCoin Fee Receiver wallet
4. Several wallets move assets from Huobi to Gate.io, like wallet 0x1A6E1D6a532B94469E6C596181FB19591bfd34dF:
5. Multi-sender app used by Grove to distribute trace amounts of GRV: https://mct.xyz/token-sender
6. Comparison of the average daily traded volume for the two weeks leading up to March 15th with the average daily traded volume since March 15th (i.e., the day Grove initiated its volume manipulation scheme).
Cover Photo
Credit: Shag / @call6abe
