US Charges Crypto Market Makers, Including Gotbit, For 'Wash Trading,' Market Manipulation

Feds announced charges Wednesday against four cryptocurrency market makers and over a dozen individuals for alleged "wash trading" and market manipulation in the crypto industry.

Of the 18 individuals charged, four defendants pleaded guilty, while another defendant agreed to plead guilty. Three other defendants were apprehended in Texas, Portugal, and the United Kingdom this week, the Justice Department said in a press release Wednesday.

Defendants Conducted Sham Trades in Crypto Tokens

"Three market makers – ZM Quant, CLS Global and MyTrade – along with their employees are charged with allegedly wash trading and/or conspiring to wash trade on behalf of NexFundAI, a cryptocurrency company and token created at the direction of law enforcement as part of the government's investigation. A fourth market maker, Gotbit, its CEO, and two of its directors are also charged for perpetrating a similar scheme," the DOJ said.

The DOJ revealed that the defendants made "false statements about their cryptocurrencies and executed sham trades in those tokens," also referred to as wash trades, to make investors believe that the tokens in question were good investments.

Once the tokens' trading prices climbed due to the "deceptive tactics" employed by the defendants, they allegedly sold the tokens "at the artificially inflated prices," which is commonly called "pump and dump" in the crypto space.

Among the charged entities, Gotbit is probably the most well-known in the crypto space, especially since the company has been called out in the past by prominent crypto sleuth ZachXBT.

What Did Gotbit Do?

Indictment documents revealed that Gotbit and its charged executives have been accused of conspiring to manipulate the trading volume and prices of various tokens to profit from the payments of crypto firms and from the sale of those crypto tokens.

The market maker has also allegedly been publicly advertising supposedly legitimate services on its website while "privately offering clients illegal services that included market manipulation."

In communications between a Gotbit employee only identified as CC 3 and Vy Pham, described as an individual involved in the promotion of the Robo Inu token and other crypto ventures, Pham allegedly asked Gotbit to "slowly increase the volume" of Robo Inu to make it trend on CoinMarketCap.

"Yeah we can increase more volume gradually but it is important that our market looks organic," CC 3 allegedly responded.

ZachXBT didn't have much to say about the charges. Instead, he re-posted his previous call-outs of the market maker, wherein he warned crypto users to be wary of working with Gotbit, saying the firm had "highly questionable services."

He also included screenshots of social media users posting news reports about the charges against Gotbit and the other three fraudulent crypto market makers, as well as Gotbit's earlier criticism of ZachXBT for the researcher's doubts regarding the firm's business practices.