- The SEC charged three so-called market makers in the crypto space and nine individuals for fraud and market manipulation.
- The investigation involved the Justice Department and FBI, which revealed the deceptive practices used to manipulate the market.
- The SEC seeks permanent injunctions, financial penalties, and officer bans for those involved.
In one of the largest crackdowns, the SEC charged three market makers and nine individuals involved in the crypto industry for market manipulation. The SEC filed accusations in the District Court of Massachusetts, citing the defendants as running fraud schemes to deceive retail investors.
While working with the FBI and the Department of Justice, the SEC’s investigation exposes how the crypto assets have been deliberately manipulated to appear very active in trading, especially to attract investors.
According to the SEC, crypto promoters Russell Armand and Maxwell Hernandez employed firms such as ZM Quant and Gotbit to artificially inflate the trading volume of certain cryptocurrency assets. This, according to the regulators, is a scamming technique that misled investors that the assets were in active trading when, in actual sense, such trading had actually been faked.
Market Makers Accused of Artificial Trading
The “wash trading,” in which the same parties simultaneously buy and sell assets to create fake volume, was the centerpiece of these diverse schemes of market manipulation. ZM Quant, Gotbit, and CLS Global allegedly used bots to conduct billions of artificial trades every day, further distorting market activity.
This case only scratches the surface of many concerns about how easily crypto markets can be manipulated-with market makers making money at the expense of unsuspecting retail investors. Sanjay Wadhwa, Deputy Director of the SEC’s Division of Enforcement, said:
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.
SEC Seeks Strong Legal Action
The SEC has filed the complaint for five violations of anti-fraud and market manipulation laws. It seeks a permanent injunction against all defendants’ financial penalties, and bars against certain individuals serving as officers or directors. Some of them have agreed to the settlement of the case by consenting to comply with the regulations of SEC pending court approval.
Armand and Hernandez are among those who have agreed to this. However, the case does epitomize increased regulatory focus on the crypto market in a bid to ensure no more manipulation occurs and that investors are protected from fraud.
Related Reading | XRP Consolidation: Will Key Support Level Trigger The Next Big Move?
