Crypto Market Manipulation and Its Legal Implications Under Turkish Law
A) Introduction
Since the launch of Bitcoin in 2009, the world of digital assets has expanded at an unprecedented pace. Thousands of different cryptocurrencies have entered the market, offering a wide range of innovative use cases and technological advantages. The most commonly cited benefits include instant and low-cost international transfers, peer-to-peer payment possibilities, uninterrupted asset transfers, and a system not directly tied to a centralized authority.
Yet, alongside these advantages, this new financial ecosystem has also opened the door to significant market vulnerabilities. Malicious actors have exploited the decentralized nature of crypto markets to carry out various manipulative activities. Among the most common threats are hacking incidents targeting crypto projects, phishing attacks, rug pull fraud schemes, and manipulative trading activities, particularly on small-cap, low-liquidity tokens.
In Turkish law, cryptocurrencies are legally defined as “intangible assets” under the Regulation on the Non-Use of Crypto Assets in Payments (effective 16 April 2021). In this article, they will be referred to simply as “crypto assets” or “cryptocurrencies.” This text aims to provide an overview of the types of manipulative practices in the crypto markets and their legal consequences under Turkish law.
B) Understanding Manipulation
In financial markets, manipulation refers to artificial activities aimed at influencing the price of an asset without legitimate market reasons, often for personal gain, while misleading other investors. Manipulative behavior is distinct from speculation, which involves legitimate risk-taking and investment decisions based on expected future price movements.
Speculation, although sometimes negatively connoted in daily language, is not illegal. Manipulation, on the other hand, typically involves intentional deception and price distortion, which can harm market integrity and investor trust.
C) Types of Manipulation
Crypto markets, being less regulated and more volatile than traditional capital markets, are especially vulnerable to manipulative schemes. These actions often rely on social media, chat groups, and online communities, where large groups of investors can be easily influenced.
a. Information-Based Manipulation
This involves the deliberate spread of false or misleading information about a project, a token’s technology, its partnerships, or regulatory status to affect supply and demand. False news articles, fake announcements, bot campaigns, spam emails, and social media rumors are common methods. The goal is to artificially drive prices up or down to benefit certain actors.
b. Transaction-Based Manipulation
Here, individuals or coordinated groups attempt to create a fake impression of market activity by placing or canceling large orders or by engaging in rapid buy–sell cycles. This can trick other traders into thinking that a trend is forming, prompting them to buy or sell against their interest.
D) Common Manipulation Techniques in Crypto Markets
1. Pump and Dump
This classic manipulation method involves a coordinated group buying a low-cap token to artificially inflate its price. Once the price reaches a desired level and broader investor interest emerges, the group sells their holdings for profit, leaving other investors with losses. Social media channels and messaging groups often serve as the organizational ground for such schemes.
2. Whale Wall (Spoofing)
“Whales” (holders of large amounts of a token) place massive buy or sell orders to create false perceptions of market demand or panic. Once smaller traders react, these whales cancel the orders and profit from the ensuing price movement. This is a form of market manipulation that undermines price discovery.
3. Wash Trading (Fake Volume)
Some actors artificially inflate the trading volume of a token by simultaneously buying and selling the same asset, often through related accounts or bots. This gives the illusion of high liquidity and demand, attracting unsuspecting investors. Such tactics are especially common on unregulated exchanges.
4. Stop-Hunting Strategies
In this method, manipulators deliberately push the price toward key stop-loss levels. When a large number of stop orders are triggered, the price drops sharply, enabling the manipulator to buy at discounted prices.
E) Legal Perspective Under Turkish Law
Under Turkish law, manipulation is clearly regulated in capital markets through the Capital Markets Law (Sermaye Piyasası Kanunu) and the oversight of the Capital Markets Board (SPK). Article 3 of the law defines “capital market instruments” to include securities, derivatives, and other instruments designated by the Board.
Currently, cryptocurrencies are not explicitly classified as capital market instruments. As a result, manipulative activities in crypto markets do not fall under SPK’s direct jurisdiction unless a specific token is structured in a way that qualifies as a security or investment contract.
However, if crypto assets were to be legally classified as capital market instruments in the future, manipulative acts such as pump and dump, spoofing, and wash trading could trigger SPK investigations, administrative fines, and potential criminal sanctions.
F) Applicable Legal Provisions Beyond Capital Markets Law
Although the SPK framework does not yet cover most crypto assets, other areas of Turkish law may apply:
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Turkish Penal Code (TCK):
According to some legal scholars, manipulation of crypto prices for personal gain may amount to “damage to property” under Articles 151–152 of the TCK, especially if third-party losses are proven. -
Turkish Code of Obligations (TBK):
Investors who suffer losses due to manipulation may claim damages under Article 49 for tort liability or rely on unjust enrichment provisions to recover illicit profits gained by manipulators. -
Consumer Protection Law & General Clauses:
In cases where small investors or consumers are targeted, misleading advertising and unfair commercial practices may also trigger administrative action.
G) Conclusion
The rise of crypto assets has introduced new forms of market manipulation that go beyond the scope of traditional financial regulation. While Turkish capital markets law currently does not cover most crypto assets, existing legal mechanisms in criminal and civil law offer certain remedies to affected investors.
However, the lack of a comprehensive regulatory framework leaves both investors and authorities in a vulnerable position. As the sector grows, developing clear rules on market abuse in crypto markets—similar to those in traditional financial systems—will be critical to ensuring market integrity, investor protection, and legal certainty.