Singapore-base cryptocurrency exchange Bitforex has raised all the wrong flags by going from zero trading volume four months ago to $5 billion currently.

“Four months ago, BitForex was just one of many obscure exchanges offering users the ability to trade cryptocurrencies like Bitcoin,” says Bloomberg in a study on false volume reporting by crypto exchanges. “Today … it is regularly reporting daily transactions that exceed $5 billion – nearly matching turnover on London’s 217-year-old stock exchange.”

The obvious question that follows is how did Bitforex and other similar startups expand so quickly in spite of a tumbling crypto market that has lost about 80% of its value this year?

Well, many experts and market participants suspect foul play. They believe these “fast-growing exchanges are either offering incentives that encourage users to inflate volumes, or not doing enough to stop abuse on their platforms.

Bitforex’s volume is the biggest

“One red flag at BitForex: Its reported volume is by far the biggest among 219 platforms tracked by CoinMarketCap.com, despite traffic on its website amounts to a tiny fraction of most peers,” says Bloomberg.

A simple view of CoinMarketCap.com’s report on volume and website visits of the crypto exchanges reveal that some of them report volumes that far exceed their web traffic.

“On that metric, DOBI Trade, BitForex and Liquid stand out as having reported transactions many times larger than website visits,” which is highly suspicious, Bloomberg adds.

Liquid says website traffic on www.liquid.com is low relative to its volume since it recently changed the exchanges’ name and users are still migrating from its old websites.

Cashing out may be a huge problem

The news outlet explains that “for individual investors lured to exchanges with inflated volumes, the risk is that cashing out at prevailing market rates may prove much harder than the reported figures suggest”.

Bitforex Vice President Garrett Jin responded to the allegations saying that trading on its platform has surged because of its so-called transaction mining system.

However, the study says transaction mining or trade mining is a very controversial practice. On Bitforex, for example, minors earn the equivalent of $1.20 in digital tokens issued by the exchange for every $1 they in transactions fees.

“It’s a system that critics say is tailor-made to encourage wash trading – in which a trader, or a team of traders, buy and sell the same asset repeatedly to inflate market activity,” Bloomberg explains.

Jim Bai, CEO of EverMarkets Exchange, told Bloomberg he believes cryptocurrency exchanges will become more trustworthy as the industry grows. However, he adds, “fake volumes are unfortunately all too common in today’s crypto-exchange ecosystem.”