Reddit admins accused of insider trading of Community Points tokens

At least three Reddit moderators dumped Community Points loyalty program tokens before the social media platform publicly announced the closure of the initiative.

1/ Three @CCMOD_ moderators dumped $MOON in advance via #inside information from @Reddit admins. pic.twitter.com/ucrPkh6siX

— Lookonchain (@lookonchain) October 19, 2023

In May 2020 the social network launched the program in beta testing mode to reward users for posting content. As part of Community Points, the assets use the ERC-20 standard on the Ethereum network.

To scale the initiative, the platform used the second-layer solution Arbitrum.

Subreddit participants received different tokens. For example, in the r/Cryptocurrency thread they were MOONS, and in r/FortniteBR — BRICKS.

On October 17 Reddit announced the winding down of Community Points. The team attributed it to unreasonably high resource costs for the initiative and suggested that there might be more scalable solutions to incentivise loyalty.

Lookonchain experts found that 23 minutes before the post was published, 109 MOONS were sold for about $23 000.

Five minutes later, 346 422 MOONS (~$56 000) were liquidated, followed by another 363 227 (~$59 000).

According to on-chain analyst nicknamed Pledditor, the admins learned of the closure about an hour before the decision was published, and three of them disposed of the tokens. The sell-off caused price slippage of roughly 22% even before the platform’s announcement. After it, asset prices finally collapsed.

.@Reddit admins told /r/CryptoCurrency moderators beforehand, and 3 moderators sold $MOON tokens on insider information$MOON price dropped -22% minutes before the announcement was posted

Here is a list of Reddit moderators acting on inside information BEFORE the announcement: pic.twitter.com/xAh75hOVEa

— Pledditor (@Pledditor) October 18, 2023

In July 2022, Reddit announced another blockchain initiative — collectible NFT-avatars on Polygon.

In May, the number of holders of the limited-series tokens neared 10 million.