Crypto Market Manipulation: Prosecutors Charge Four 'Market Makers'

The cryptocurrency industry is grappling with another wave of market manipulation charges, as U.S. prosecutors announced legal action against four 'market makers' and their employees. The charges, which include market manipulation and fraud, highlight the ongoing challenges facing the crypto industry in maintaining investor confidence and regulatory compliance.

The U.S. Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) have filed five complaints against ZM Quant, Gotbit, CLS Global, and MyTrade, along with nine individuals. The charges allege that these entities and individuals engaged in schemes to manipulate the markets for various crypto assets, creating the false appearance of an active trading market to induce retail investors to purchase these assets.

The SEC's Deputy Director of the Division of Enforcement, Sanjay Wadhwa, emphasized the victimization of retail investors by fraudulent activity in the crypto markets. He stated, "With purported promoters and self-anointed market makers teaming up to target the investing public with false promises of profits in the crypto markets, investors should be mindful that the deck may be stacked against them."


The SEC's complaints allege that the defendants manipulated markets by self-trading, commonly known as 'wash trading,' on popular crypto asset trading platforms. They also employed algorithms (or bots) that generated quadrillions of transactions and billions of dollars of artificial trading volume each day. The SEC is seeking permanent injunctions, conduct-based injunctions, disgorgement of allegedly ill-gotten gains plus interest, and civil penalties against all the defendants, as well as officer and director bars against certain defendants.

The charges come as the crypto industry faces increased scrutiny from regulators worldwide. The SEC's Crypto Asset and Cyber Unit (CACU) has expressed concern about the ease with which the market for a crypto asset can be manipulated. The unit is committed to rooting out instances of such misconduct when it involves securities.


The crypto industry must take proactive steps to restore investor confidence following these charges. This includes implementing robust compliance measures, enhancing transparency, and fostering self-regulation. The industry should also work closely with regulatory bodies to develop clear guidelines and standards for market conduct and disclosure.

The long-term consequences of these market manipulation schemes on the crypto industry's growth and adoption are significant. As investors become more aware of these fraudulent activities, they may be hesitant to participate in the crypto market, potentially hindering its growth and adoption. However, if the industry can effectively address these challenges and demonstrate a commitment to transparency and investor protection, it can restore confidence and foster long-term growth.

In conclusion, the recent charges against crypto 'market makers' underscore the importance of regulatory oversight and industry self-regulation in maintaining the integrity of the crypto market. As the industry continues to evolve, it must prioritize investor protection and transparency to ensure its long-term success.