Front-running, in stock trading and also in cryptocurrency trading, is the illegal practice of using insider information to make securities purchases knowing other purchasers are going to buy the same stock or currency and then selling it at a higher price. The key to this illegality is the non-public nature of the information being used by the purchaser. In cryptocurrency transactions the practice is easier to get away with as once a DEX transaction is broadcast to the network, even before it’s included in a block, other users particularly, a bot, (short for “robot” an automated program that runs over the Internet) will spot the same opportunity. They charge in, bid a higher gas price so that a miner will include their transaction in a block first, and take the profit away from the trader.
From reports frontrunning is a rapidly increasing occurrence and to date there have been no recorded prosecutions of front-running on cryptocurrency purchases. If anyone has any examples
or believe they can establish front running please contact me at jeff@jeffnewmanlaw.com 617-823-3217
JEFFREY NEWMAN REPRESENTS WHISTLEBLOWERS NATIONWIDE INCLUDING IN THE SEC WHISTLEBLOWER PROGRAM.
