A Day with Market Manipulators and “Shariah-Compliant” Token Peddlers

How Shariah-compliant are the so-called Islamic tokens in the service of the Ummah? This intriguing question has led me on a few occasions to interact with a few “gurus in the game”. In this blog I will focus on a recent venture into the field, one where I happen to know the promoters rather intimately. It started with a query raised by me on the official telegram channel of this project. Lo and behold! I was promptly banned from the group creating a barrier to any kind of communication in the channel. Since then, I have sought to reach out personally to the “official” Shariah scholars associated with this venture, to understand the Shariah basis of the massive fund-raising exercise from the general public that was going on. While my personal interactions with one of them ended every time with a disappearance act by the said scholar on some pretext or another, I was somewhat amused to learn after a few weeks that the Shariah panel had meanwhile produced a document seeking to justify the exercise as bai-salam. This was apparently a counter to my earlier blog, questioning the use of bai-salam for this unIslamic practice. I had to exercise utmost restraint to refrain from challenging the spurious grounds on which the exercise was validated. I decided to transform myself into a silent observer.

The token company went ahead with its sale, brushing aside all raised eyebrows, and “intelligently” using the fail-safe tool of telegram groups and other “paid” media insertions. It apparently succeeded in selling a miniscule percentage of a planned massive issue of one billion tokens. A few months later, the token was listed on a private Exchange. Now was the time to ensure a vertical price rise on the Exchange; if its forthcoming public sale was to succeed, I thought. That was when I happened to get in touch with a Board member of this (now down-graded from Shariah-compliant to Muslim-friendly) company, whom I knew to be a friend and a person who would never stray away from the straight path. I pleaded with him reminding him about the need to ensure good market conduct as against price manipulation. I cited the primary sources of Shariah that explicitly prohibit a najash sale (artificial manipulation on demand side) or the practice of ihtikar (artificial manipulation on supply side). I pleaded that it was simply a regulatory vacuum in most countries in the matter of issuance of utility tokens that allows the issuers to operate with impunity. The absence of regulations does not make the game “halal”. It is more painful when the token holders are low on financial literacy and come from the lower strata of the economy. I pleaded with him to stop his company from being like one of those 85 percent of the ICOs that disappeared without a trace in the aftermath of 2017-18 ICO boom!

He ignored my plea, saying he would leave the matter of Shariah to the panel of scholars engaged by his company. His post in the social media next day was an eye-opener for me. He seemed to have become far more convinced that there was “unhealthy” and strong opposition to the noble project of financial inclusion that he was into and that he would strive harder to make every small token holder financially far better-off than before. I was disappointed. I had shared my apprehensions. But here, I was about to lose a good professional friend for ever.

I also felt I should not be upset about mere possibilities. I had no evidence of price manipulation by this company, even though its pre-market behaviour was clearly unethical; unless I was going to engage in some research with price-volume data on this token. I decided to look the other way.


For the last couple of days, prices of all tokens have been falling steadily. And the other day, in one social media message the CEO of this company made a claim that was hard to believe. When all the token prices were falling, this token was showing a rising price trend. We know how to make money in the market – he boasted. I was surprised and wondered – for how long prices can be manipulated for this token to swim against the tide and to keep moving up? The telegram channel was now screaming about possibilities of four-digit percent price appreciation by the time the public sale would begin. Hold on to your tokens, it kept advising loudly.

I witnessed something odd in today’s telegram group messages of this token. The number of members in the group had come down in the post-listing phase from about 70k to 44k. And there were some angry voices too. From the officials, there were repeated threats of banning the accounts of dissenting members, the ones who would keep questioning “unnecessarily” the practices of promoters. Was this an example of corporate democracy that the social media posts and ask-me-anything webinars organized by the company in the past were screaming about?

I did not require more than the intelligence of a school kid to discern the fact of a clear manipulation of prices by a single account.

Apparently, one seed-investor had dumped his/her tokens in a fairly large volume for the price to tank by over 15 percent. I was curious. And I decided to check the price-volume-transactions data of this company just for today. I did not require more than the intelligence of a school kid to discern the fact of a clear manipulation of prices by a single account.

If you examine the the above random screen today you can see that out of 17 transactions in above chart, 12 large ones were “reversing” transactions. This was happening in broad day light all through the day – a large sale in X quantity followed by a purchase of same quantity; a large purchase of Y quantity by a sale of same quantity, all from a single account (follow the red arrows).


And then it was time for the impatient betrayal.

And then it was time for the impatient betrayal. Indeed, there was this seed investor who seemed to have betrayed the common good of the cartel. While the earlier price manipulator was still busy in his game, the lone wolf had struck. His/her one account (follow the yellow arrows) was singularly responsible for dumping a large volume of tokens within an interval of 30 minutes. One more account holder was quick to notice this and follow suit (follow blue arrow). The steep fall in price by over 15 percent naturally caused a raucous in the telegram group and loud voices complaining about unethical acts by promoters. These were the same voices that were congratulating the promoters when prices were being manipulated upwards and upwards.

I wondered, if the promoters have started feeling the heat and decided in favor of dumping after days and weeks of pumping!

Don’t the distinguished members of the Shariah panel know that any form of manipulation of demand and supply and hence prices, is simply haram? Or have they lost their voice in the Board? I also wondered, has this been a day well-spent in following price charts and authoring this blog to enhance the level of awareness about the fraud being perpetrated on common investors? Or has this been an exercise in vain?

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  1. Let’s look at your screenshots. It is evident that the buys and sells happen in a single block and within seconds. Thus, it has absolutely zero impact on price. Market making to generate volume as long as price is not manipulated is common practice in this space. Reason being CEX’ do NOT list projects that have too small volume. As a new project and especially one like above that targets a very specific target audience initially has limited reach. Thus, to tick a box for CEX’ to list and indirectly grow the project they need to generate volume. Second point, MM makes the pair liquid thus minimises slippage for everyone. Thirdly, each trade on a DEX actually is losing tokens because of second reason. Slippage. So overall the project running MM loses money each trade. The price growth and “dump” has been organic as it can easily be tracked with DEXTools on wallet that bought on the way up and wallets that sold on the way down.

    1. What you narrate doesn’t show your practice of “wash trades” to be halal Mister. We are talking about Islamic markets free from najash sales and ihtikar. Your crypto market is no different from other speculative markets and you would soon face the axe from the regulator. You would also soon hear from the global Shariah community.

  2. Let’s address the point you made. Volume generation is not something that is against Shariah as long as price is not manipulated. The highlighted account on your screenshots clearly buys and sells within seconds meaning zero price movement, up or down. Its literally generating volume but nothing else. Volume must be generated for projects to get listed on CEX. This is how crypto world works. As for the price increase, show me the account that manipulated the price going up and I’ll agree with you. The growth was natural and rise was from demand not manipulation. Let’s address your third point. Shariah board do not have to engage with you on a day to day basis. You have no role or title and they have no obligation to address anyone that sends them a message.

    1. The regulators (for similar speculative markets and similar market manipulation) have spoken. The Shariah scholars will speak soon.