Győry Csaba: Crime on the Cryptocurrency Markets: Project Introduction

The basic aim of the proposed project is to provide a comprehensive overview of criminality of on cryptocurrency markets. Cryptocurrency markets now have a market capitalization of around 2,7 trillion USD and are increasingly integrated with legacy securities markets. They have also been traditionally significantly infected by criminality. Despite these developments, criminality on the cryptocurrency markets have so far received little academic attention.

The project has 4 main research questions and consists of 4 distinct subprojects.

1. The first concerns definitional issues. Comprehensive attempts to define crypto crime are so far lacking in academic literature. As a first step, the project will thus develop an own conceptual frame and classification of crimes on the cryptocurrency markets.
2. The second reserch question refers to the characteristics of crypto markets that facilitate criminality. Building on the PI’s previous theoretical work, the project considers cryptocurrency markets as embedded markets in three aspects. They are technologically embedded as the technological features of crypto intrinsically define everyday market action, criminal offenses among them. They are socially and culturally embedded as investor behavior is fundamentally shaped by shared cultural understandings and ideologies of market participants. And finally, they are also politically embedded as state reaction, including regulation and enforcement now elementally shape market action. Based on these considerations, the project also aims to develop a comprehensive theoretical framework that explains both the institutional as well as the individual factors that shape criminality and victimization in the crypto space.
3. The third research question concerns the the factors influencing victimization in various forms of investment fraud. Based on the theoretical framework, and building on recent works in criminology describing the crypto investor community as a distinct subculture, the project formulates the hypothesis that retail investor behavior, and through this, everyday market interactions, are fundamentally influenced by cultural and ideological factors, and these play a central role in investor victimization as well. The question is investigated empirically, combining qualitative content analysis of self-reported victimisation posted to dedicated social media platform such as the r/CryptoScams on reddit, with online ethnography, inclduing interviews with fraud victims. Based on this, the project hopes not only to identify the major forms of crimes affecting individual investors as victims, but also to provide an empirically well-founded theory of their victimization.
4. The fourth and final question concentrates on a form of fraud which can have systemic effects on price finding and volatility on crypto markets and beyond: “pump and dump”, a form of market manipulation. A unique feature of cryptocurrency markets is that such schemes are openly coordinated by social media chanels by ordinary investors. The research project will methodologically employ a two tiered-approach, and combine social media content analysis with a machine learning-based model analysing blockchain transaction data in order to identify instances of market manipulation and the connected social media discourses.

The project is a novel undertaking in several aspects. So far, there exists no comprehensive, theoretically grounded account of criminality on cryptocurrency markets. The project is also innovative in the sense that it combines qualitative methods with advanced, quantitative machine learning-based analysis. Its results also have practical applicability: on the one hand, it develops a complex algorithm which can be used to identify pump and dump schemes as they are unfolding, and in a more general sense, can also deliver insights for institutional investors into the factors that shape the behaviour of retail investors on cryptocurrency markets.

Date: 2025. 03. 27. 10:00-11:30

Venue: Conference room of the HUN-REN Institute for Legal Studies

Address: 1097, Budapest, Tóth Kálmán utca 4.