Detecting Suspicious Activity in the NFT Ecosystem Using Temporal Graph Analysis

Abstract

Illicit activities and coordinated manipulations in the Non-Fungible Tokens (NFT) market remain significant concerns, driven by the pseudonymous and publicly transparent nature of blockchain transactions and the lack of market oversight. In this study, we introduce a novel framework for detecting suspicious behavior in NFT trading ecosystems through temporal graph analysis. Our approach represents the market as a large-scale, time-evolving transactional graph, capturing realistic market dynamics and the complex interactions between traders.By leveraging temporal graphs, we track not only connections between traders but also the evolution of these interactions over time, including their sequence, rhythm, and frequency, enabling the identification of anomalous behaviors that static graph representations cannot reveal and that may warrant further examination. Using an optimized temporal cycle-detection algorithm, we extract connected groups of wallets for in-depth behavioral analysis, uncovering patterns indicative of unusual coordinated manipulation. To overcome the absence of labeled ground-truth validation data, we employ a temporal motif–based validation, demonstrating that flagged entities exhibit trading behaviors significantly deviating from standard market dynamics. Our results highlight the potential of temporal graph–based methodologies to provide a scalable and effective risk-profiling and market-surveillance tool, assisting analysts and regulatory entities in narrowing the investigation space within the large, permissionless NFT markets and enhancing surveillance, risk detection, and regulatory oversight in decentralized NFT markets.