Sam Bankman-Fried, co-founder and chief executive officer of FTX, in Hong Kong, China, on Tuesday, May 11, 2021.
Lam Yik | Bloomberg | Getty Images

Rampant bots on Twitter helped to pump up the price of cryptocurrency, including coins traded by insiders at FTX hedge fund Alameda Research before its collapse, according to a new study from the Network Contagion Research Institute published Wednesday.

NCRI researchers conducted a scaled analysis on Twitter (now known as X) examining over 3 million tweets from Jan. 1, 2019, to Jan. 27, 2023, pertaining to 18 different cryptocurrencies in partnership with New Jersey GovSTEM Scholars. They also shared their findings with X Corp. days ahead of publication.

Mentions of certain altcoins by Tesla and SpaceX CEO Elon Musk, who led an acquisition of Twitter that closed last October, appear to have caused prices to spike by as much as 50% within one day, the researchers found.

The NCRI study pointed to Musk’s June 24, 2023, retweet of a post featuring a kitten and the caption, “I wake up there is another PSYOP,” a coin created by a pseudonymous Twitter influencer known as Ben.eth. Trading of this altcoin nearly doubled in volume over the next day, according to CoinMarketCap data.

Separately, a Musk tweet on May 13, 2023, featuring Pepe the Frog memes led to a more than 50% increase in the price of altcoin PEPE within 24 hours. Musk’s tweet fueled both authentic discussion and bot and promotional tweets about the altcoin, which is based on a popular far-right meme.

The NCRI findings raise significant questions about social media driven market manipulation in the broader crypto markets. The study also highlights the considerable challenge Musk faces in reigning in bot activity that was pervasive on the social media platform for years and still persists there.

Musk has claimed, without providing data, that bot activity has fallen since he acquired Twitter.

According to Alex Goldenberg, Lead Intelligence Analyst for NCRI, “Since Musk’s team took over Twitter last year, API changes were made to deter bot creation, possibly reducing crypto promotion and scams. However, these changes come with trade-offs as they also hinder independent audits by third-party researchers.”

Goldenberg recommends that if bot activity remains high, X Corp. could “consider stricter account verification, machine learning for bot detection, and special permissions for certified researchers to ensure transparency while combating malicious bot activity and other forms of online harm.”

X Corp. has been increasing the price to access data for researchers, while also filing lawsuits and threats against researchers looking into hate speech and other online harms on its platform. In recent weeks, X Corp. sued Bright Data and the Center for Countering Digital Hate, for example, raising the ire of House Democrats. NCRI partners with Bright Data for pro-bono access to social media data, Goldenberg noted.

X Corp. did not immediately respond to a request for comment.

FTX benefitted greatly from Twitter bot activity

The NCRI study also highlights how inauthentic activity on Twitter helped drive up the price of tokens listed on FTX in the months before the crypto exchange collapsed. “Bot-like accounts were used to manipulate market sentiment and drive up the price of FTX-listed tokens,” Goldenberg told CNBC in an interview.

Six small-cap tokens listed by FTX were significantly influenced by inauthentic social media activity on Twitter, NCRI found. The researchers said that “inauthentic chatter” was “successfully and deliberately deployed to influence changes in FTX coin prices,” for six tokens: BOBA, GALA, IMX, RNDR, and SPELL.

Alameda held at least five of these tokens before they were listed on FTX, and as bot-like activity on Twitter amplified the visibility of the tokens. For one crypto asset, RNDR, inauthentic posts and activity on Twitter concurred with or preceded double-digit percentage jumps in its price.

On four separate dates from 2022 to 2023, spikes in bot activity on Twitter preceded increases in RNDR’s price ranging from 11% to 30% within a single day, the NCRI analysis found.

FTX founder Sam Bankman-Fried and his team were well aware of Twitter’s influence on the crypto markets, and how sophisticated investors could extract value from social-media driven price action.

“People on crypto Twitter, or other sort of similar parties, go and put $200 million in the box collectively,” Bankman-Fried said in an 2022 interview on Bloomberg’s Odd Lots podcast. “In the world we’re in, if you do this, everyone’s gonna be like, ‘Ooh, box token. Maybe it’s cool. If you buy in box token,’ you know, that’s gonna appear on Twitter and it’ll have a $20 million market cap.”

FTX was one of the largest crypto exchanges in the world before it filed for bankruptcy in 2022.

Bankman-Fried, 31, now faces a federal indictment for allegedly committing securities and wire fraud. He’s also the subject of Securities and Exchange Commission charges, which alleges that he built his empire on a “foundation of deception.”

Representatives for Bankman-Fried declined to comment. The SEC and FTX did not immediately respond to a request for comment.

Read the full NCRI study here.

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