The billionaire-backed crypto exchange, Bullish, faces scrutiny after new reports reveal an alleged ‘price pump’ scheme.

In 2019 Block.one received an SEC fine as a consequence for not registering an ICO for EOS. Initial sales for EOS over the first 11 months raised over $4 billion, which made it one of the largest to date. A sale this large naturally raised many eyebrows in the crypto community.

Block.one is a software developing firm. A slew of billionaires and big names in the industry are the funders of the company. This includes the likes of Peter Thiel, hedge fund moguls Alan Howard and Louis Bacon, and entrepreneur Christian Angermayer. Its mission as a company was initially for the development of innovative tools for blockchain adoption.

Bullish exchange under scrutiny

However, it soon fell into steamy controversy. Following the SEC fine, users sued Block.one. They called the sales a “fraudulent scheme” that didn’t follow through on its mission.

Now, recently published reports reveal new information on those previously raised concerns regarding the situation. The report comes from Integra FEC, a forensic financial analysis firm, led by the University of Texas at Austin McCombs School of Business finance professor John Griffin.

The paper highlights a series of questionable trades during the EOS ICO. According to Griffin, the patterns between two potentially connected persons appeared to “pump” the price of EOS.

“The seemingly artificial demand from the suspicious accounts had two effects,” he wrote. “It directly manipulated EOS’s offering price upward through the extra buying and inflated the market value of the token. Second, it created the false impression of the value of the token, which enticed others to want to purchase the ICO token.”

The information comes as Block.one prepares for the launch of its new exchange dubbed Bullish. Allegedly, Bullish will receive funds from revenue from the ICO, which now is under scrutiny once again.

Identifying the holes

Griffin’s report targets 21 accounts over the course of the ICO. All the accounts appeared consistent with massive purchases of EOS. Additionally, all of those accounts then sold the currency to exchanges all within an hour. In the crypto industry, the name for this is “recycling.” The total of these trades equaled almost $815 million.

In defense of his research, Griffin explained how the fixed supply of tokens for purchase “buoyed” the price. “Selling through the exchange could have minimal impact on the price, especially since it can be sold slowly and in a liquid market,” Griffin explained. “Market makers make a spread and make money on the spread,” he said. “These traders consistently lost money on their trades. Why would one engage in a losing strategy unless making money somewhere else?”

In a comment to Bloomberg, Cornell Law School Professor Robert Hockett called the analysis “impeccable.” Hockett specialties in corporate law and financial regulation.

“There’s enough smoke here to suggest there’s a fire. This is what the SEC would call classic fraud and pump and dump. This is taking advantage of retail investors who don’t know what’s going on underneath and could be easily fooled.” Hockett believes that the SEC should definitely be investigating.

According to the Cornell professor, if the findings are true this could mean big consequences. It would violate the Securities Act of 1933 and the Exchange Act of 1934.

This comes at a time of heightened attention to the crypto space from the SEC. However, the SEC reportedly had no comment on this case at the moment.