Bitcoin Forum

Many people have reported that they noticed a lot of shady behavior on the part of exchanges, and here I want to discuss specific methods which many, if not all, exchanges employ to steal our money. I know of at least 2 risk-free methods which are in the store ready to be used on trading folk:

1. Exchange sees a big sell or buy order entering the system which would fill a lot of orders in the orderbook at prices higher or below the price set by the trader. In this case, exchange can itself sell or buy all these orders first and then fill the entering order at its specific price. The effect is that the exchange earns profit while the trader gets his order filled at maximum or minimum possible price. This method works exceptionally well with market orders filled at the current market price. Guess what price it will be.

2. Exchange can set arbitrary delays while adding new orders. For example, WEX (former Btc-e) officially sets a 2 second delay within which a trader doesn't know what's going on at the exchange. In this case, if exchange sees a big order, it can delay adding it waiting for another big order to arrive. If these orders are offsetting each other, exchange can then fill them itself and put the spread in the pocket. This approach works particularly well with exchanges that have lots of liquidity.

If you know of other dirty tricks that exchanges use, share them here.

But with nobody regulating them some exchanges can do dirty dealing.  That is the whole point of regulation.  To try and make sure people are not cheated.

I heard last week about how Stocks Exchange is allegedly using coins to create Masternodes from them. Not sure if that is true, and not entirely sure if that is shady but it is unethical on some level that is for sure.

I don't understand why you consider this to be theft. Exchanges have always had a difference between buying and selling prices ( the spread ). Banks do it with fiat transactions, and they often charge an additional commission on the trrade.

I guess they do it just to make an extra income on their platform despite of a big fees on every trade in some platform.

What you are saying isnt something unknown neither it is shady enough to say that exchanges steal your coins. Each exchange has certain working strategy, 2 second delay sometimes might even not be intentional but something the api needs to list the order.

Yup. I rather be worried about something that's going on we don't know about, than something we know is happening and we can prepare ourself for, or even avoid a certain exchange for. At the end of the day, an exchange tries to offer its traders the best possible trading environment, and for that reason works with certain measures (that people may or may not like) to keep it like that, or at least prevent one entity from eating through the available liquidity at once. The same applies to stock markets, so it's not that people are catched by surprise. In other words, every central authority can be accused of doing something that may benefit themselves or certain entities, and negatively impact others. It's impossible to satisfy everyone.

Weird but inevitable how much power we've chosen to award exchanges. We plead with them to ignore or embrace our forks and shitcoins. We plead with them to be good actors when filling up the Blockchain.

All the while almost nothing is known about the management, ownership and health of many of them, let alone their honesty.

In our rush to get rid of 'banksters' we've enriched and legitimised organisations run by amateurs, criminals and assholes often with zero regulation. If they ever got within reach of banking riches the crypto scene would be even more disgusting than it is right now.

It's one of the major barometers of crypto's real progress towards making a better world. Right now it's looking fairly samey.

Maybe, because front running, which the tricks mentioned here fall under, is considered unethical practice in any trading environment? Obviously, it gives an undeserved advantage to some market players, in this case to exchanges, but in trading such advantage always means money, money lost and earned, if it can called that. Which, if you ask me, is not very far from stealing. Anyway, front running is officially prohibited on any major regulated exchange, and the exchanges that get caught suffer severe penalties. Not that it prevents them from further attempts at secretly deceiving their clients whenever possible but still.

They do it with fees. More we trade, fatter they get. When price of coin increase and transactions fees decrease, exchanges are super slow oto reduce their withdrawing fees and keep them high as long as they can. Some exchanges like HitBTC even takes fee when you deposit coins there.

They charge fees during trading and there are so many trades they earn a lot but they also charge a very high fees for withdrawal. So every time you withdraw money you can giving it to exchanges.

While your accusations may not apply to certain exchanges, I think it could well happen. It's definitely doable for an exchange, almost undetectable and very profitable if they can do these on a consistent basis on this volatile market.

I think that the main issue with exchanges right now is still the fact that people are storing funds on them.

Most likely, exchanges are investing in stuff that they don't tell their customers about or even just using their money somewhere else to do stuff for the owner's benefit.

Many exchanges may be insolvent due to fractional reserve, and that's a huge way that exchanges are essentially watering down the coins you store on their site.

If I understand correctly, you're basically saying that instead of processing orders in the order they come in, exchanges are processing them in such an order where they will make the most amount of profit, and could use delays to this end?

I guess it could be said that it's shady behavior, but you could just as easily say it's good business sense. Wouldn't it also be considered nothing in the grand scheme of things because we're only talking about manipulating (using the term very loosely here) transactions made within literally a couple of seconds within each other?

I might have totally misunderstood what you were saying, but that's my two satoshis anyway lol.

It's not that I absolutely trust in exchanges either. You never know which one will have a "hacking" incident, and whether they're legit or not. Someone's definitely stealing your money either way, and exchanges are involved one way or another.

We cannot know this if no one regulating them, this might be true or not but its their business and we have no choice but to use it anyway, they make money through fees or even in that way but as long as my funds are safe there I will keep my mouth shout because I am using some exchanges smoothly and hopefully they can go even better.

No, it is not just about listing the orders. 2 second delay at WEX is the clock tick at which data is refreshed. It means that if you are using their API to access trading data, you will be querying cashed data. Obviously, it is claimed that the purpose is to lower load on exchange servers but as a side effect, you don't know what's actually going on at the exchange for the next 2 seconds after you receive refreshed information. But 2 seconds is a huge amount of time within which a lot of things can happen.

Anyone who trades or makes use of exchange and don't know that most exchange does dirty tricks to get more money from users aside their regular gain is still learning. Aside the two you mentioned above, the one that hurts me more is that sometimes some hacks that do happen in some exchanges might have the tendency of been done by their owners. This is all greediness and unfair.

Oh gosh, they make money? !!? I thought it was a service to the good of mankind.  ::)

So yes, when i buy coin at 0.0341 i might be buying from exchange who brought from someone at 0.0340.  I got my price, he got his price, if we do market orders we dont care about precise price. What exact is the point of this revelation?  We close exchanges?

People are good at complaining about centralized services, which in some cases is well justified, but in some cases also not. Believe me, I have seen a lot shady stuff happen on various altcoin exchanges throughout the years, but I kept using them regardless of that, and so are other people. I partly agree with OP even though it can't really be considered theft in my opinion, and others in this thread seem to believe so too. The point is that with how people are so dependent on these centralized exchanges, they will continue to swallow everything as long as it isn't forming a major obstacle for themselves. It basically means that an exchange will continue to behave in a certain way without people actually complaining or taking strong action. If you do something even remotely wrong, and no one points you to your wrongdoings, you'll continue your usual path....

I don't think that exchanges steal our money, because they earning big money on their fee. They have fee when you sell , buy and withdraw money. Some exchange even have fee when you deposit bitcoin , that is really bad in my opinion, so before you open account on exchange first read about Fees.

No, I don't mean that. Out of order execution is out of limits even for crypto exchanges, though where it happens, and it does happen here and there, it may in fact be due to bugs in a trading engine rather than malicious intent. I know that at Bter, a Chinese exchange that was active a couple or so years ago, you could fool their trading engine and get your orders executed before anyone else's in the same queue. Obviously, this is an unfair advantage. But there is nothing fair in what I speak about in OP either. Honestly, I don't understand why some people here consider this or similar practices kind of normal. Regular exchanges get severely punished if they get caught doing such things.

Another method i've ran into myself lately and hear about increasingly is freezing withdrawals.

You create an account, get verified, all is cool, you deposit and trade a bit, all is cool.

You decide to withdraw.
Withdrawal gets put on hold.
You'll be asked for additional verification documents and selfies.
Once you provide this they will reply they need to know the exact source of the funds you deposited to them and your intentions of the crypto you're going to withdraw.
They ask this in such detail that it is nearly impossible to provide, screenshots of wallets are demanded, links to every transaction on the blockchain that is related to those funds, you'll be asked to show how you got this crypto in the first place with bank statements or screenshots of mining pools.
It is absolutely ridiculous and criminal.

This scenario happened to me with both Bitstamp and HitBTC.

It's been months and i've been unable to get my funds out after countless email and support tickets.

#1 and #2 below are the exact same activity you're accusing the Exchanges of committing - delaying trades.


I wouldn't call these dirty tricks, it's a benefit of making the market. What keeps these exchanges in check with this activity is the competition coming from other exchanges. If I see a better price on another exchange I'm going to go to the competition.

Exchanges are allowed to make the spread, that's how they make money. By fulfilling Bitcoin (or insert cryptocurrency/investment) buy orders for more than the sell orders. It's not stealing, it's literally how they make money. It's nearly no different than a bank loaning out money at a higher interest rate than they pay for savings.

It may not look like a big deal until you send a really big order and then things get real nasty. And they get even nastier when you send a market order which means that you give the exchange a full leeway to do whatever they want with the price and go at the double where their greed leads them. In short, it is not as innocent as it seems to you. The point is if you are a person with deep pockets, you should be aware and beware of how exchanges want to make money off you in a way that you don't even suspect. Will you be happy to find out that someone is making money at your expense? I don't think you would.

I take these words as sarcasm, because any exchange and exchanger has good earnings thanks to users. and I can assure you that the more the user's pocket, the greater the percentage for the Exchange Administration.

They probably weren't. We all know service providers charge fees to end users because the world isn't a charity, and everyone gets that. What the OP is describing is that they're making money using your money, without your knowledge. You don't technically lose anything, but it could be considered shady because of the manner in which it was done.

So, are there some exchanges that have actually been caught doing these, or are these just possibilities?

Haven't faced any issues with the exchanges, one thing that made me more careful in the cryptocurrency industry was the cheating done by an wallet service. Bit.ac was a wallet service provider, suddenly it went away cheating more users and I've got more than 0.2btc into the wallet.

But did our governments has good understanding on how cryptocurrencies works and some of them did not have good faith on bitcoin regulations and what we have now is far better than when government start to regulate it. Exchange platform are really making a lot of cheating in dealing with our transaction and I think we should not do thinks that is going to affect cryptocurrencies out of greed and selfishness. Exchange platforms has a lot of saying in the development of cryptocurrencies and there are stakeholders in it.

This is definitely not about fees, which you implicitly accept when you start using an exchange. You know human greed knows no limits, so you wouldn't really expect exchanges to lose 100% bullet-proof opportunities of making money off their clients, even if such practices are universally frowned upon, would you? And still more so if they can walk away completely unscathed, and there is no single entity to unleash justice on the wicked.

You forgot #3 - shuts down and runs with all your money

Seriously, if you place large market orders on any exchange, Bitcoin or otherwise, you've got to be a moron.

I don't see what the first method has to do with delays. There are no intentionally added delays when an exchange takes liquidity from the orderbooks. In fact, it is in exchange's best interest to pull off the job as fast as possible. I'm curious where you got this idea from. Care to explain?


Neither I understand what you mean here by "making the spread", but front running is definitely not an allowed practice on regulated exchanges up to a point of causing serious penalties. And there are good reasons for that like providing level playing ground for all market participants.

This may only happen if that exchange have not gained enough supporter, or if they think they already get a huge amount that will be enough to risk their name and to be followed with lots of chaos from their user. Now that governments were into dealing with exchanges legalities , it will  be hard for them now.

It looks like government regulations on crypto exchanger may now needing  to have it. Not for the reason that to regulate the price but to have a certain agency to take dealings with exchanger owners and to know also a legit one.  Because as I've observed, a lot of exchanger is now created and I'm pretty sure that some of them are just scam. 

Well that's one fact that traders would have to live with. So it really just boils down to being selective about which exchange you're going to use. All these exchanges have issues but they of course wouldn't want too many negative ones to smear their reputation. So stick to those that many users are trusting as well and keep a wallet outside exchanges

Yeah there are some exchanger that steal money. Especially hitbtc. My 400$ didnt give back. I been sent them a my token NGC (Naga) 100token. But it only appear in my account is 20ngc.. the 80 ngc was dis appear

Recently, we have been experiencing problems with the registration and use of exchanges. Those exchanges that have a reputation for closing anonymous accounts and do not register new users. The requirements for verification are constantly tightened. I think that soon there will be exchanges that allow you to Deposit and withdraw Fiat. There will be only cheaters.

You need to use other resources to output crypto currency into real money. I think that the exchange should be used only for trade, and not for cashing.

Yes. It's how market makers make their profit, and without market makers, liquidity would dry up.

This is how the exchanges works , in the digital world as well as in the real world .
I agree , that at some point the exchanging and trading process takes way lot of money in the way of the exchange from one coin to another and the rates needs to be revised and standardized as each exchange has different prices .
In the banks too we have to pay some fair amount of money for some exchanges to be done . We ignore it in the name of "tax" that is authorized by the government and is made mandatory.                                                                                     

I don't think reputed exchanges will involve in these kind of shady activities,the chance of happening this only if we deposited our money in new exchanges,for me it never happened that exchanges steals our money because I never kept huge amount in their wallets. :P

now  the new methode used by some exchange is by staking and creating masternodes , using users deposit coins , and then dump this coin on the markets , so many coins never see a price rise.

Before we come up with any conclusion, we must know how the said exchange platform works. We should also know how they make a profit.

Exchange platform usually makes a profit in the difference of spread during buying and selling. We are exchanging our currency based on what we have agreed to exchange.  I think it has no different with the real world exchange fees that vary based on the area. For Cryptocurrency, I believe they implement maximum fees on every transaction.

We exchange our bitcoin in need and they take the advantages.But we are doing this for a long time because we don't have any choice.We are also doing this for better security.  Though they actually ensure us the security, yet they take some excess only to make a business ....

That is shit, no one should do that because you are doing something that is not honest at all..

By the way, all the exchanges are crap and they steal a huge amount of money to all of us, independently from how much we deposit in there

In fact, exchanges has their liquidity to do this with their tricks, it's how they making the profit. Exchanges in crypto currencies have full space to take many advantages for themselves, for example how the fee withdraw for each exchanges is different even sometimes for the deposit we are exposed to cost.

So not surprising if there is a lot of new exchange popping up massively. They see the clear opportunity to make money from plain stupid people and foolish naive one , well I know that's what everyone think about how you feel in disadvantage , some exchange run the business healthy and some in dirty , the point we can't prove the accusation , that's all.

Ultimately, all crypto exchanges are vulnerable because there are inside jobs and hacks. But if coins get stolen, there is no way back. I don't remember an exchange that got hacked and managed to get all their coins back. In August 2016 over 70M dollar worth of BTC got stolen from Bitfinex, and no one knows for sure what's happened to them since then, apart from the thieves themselves, of course. There's no safety in centralized exchanges. Regulations may help a bit, but crypto will remain crypto and no amount of regulation will prevent future hacks.