- The SEC has charged three so-called market makers and nine individuals in the cryptocurrency industry with fraud and market manipulation.
- The investigation involved the Department of Justice and the FBI and uncovered deceptive practices used to manipulate the market.
- The SEC is seeking a permanent injunction against those involved, financial penalties, and the expulsion of executives.
In one of its largest crackdowns, the SEC has indicted three market makers and nine crypto industry officials on charges of market manipulation. The SEC filed charges in Massachusetts District Court, alleging that the defendants were engaged in a fraudulent scheme to defraud retail investors.
The SEC investigation, in cooperation with the FBI and Department of Justice, reveals how crypto assets have been deliberately manipulated to appear highly active in trading, especially to attract investors. .
According to the SEC, cryptocurrency promoters Russell Armand and Maxwell Hernandez used companies such as ZM Quanto and Gotbit to artificially inflate the trading volume of certain crypto assets. Regulators say this is a fraudulent technique that misleads investors into believing that an asset is actively traded, when in fact such trades are fake.
Market maker accused of artificial trading
“Wash trading,” where the same parties buy and sell assets at the same time to create false volumes, was at the heart of these various market manipulation schemes. ZM Quant, Gotbit, and CLS Global allegedly used bots to make billions of artificial trades every day, further distorting market activity.
This incident just scratches the surface of many concerns about how easily the cryptocurrency market 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:
As so-called promoters and self-appointed market makers collude to target general investors by falsely representing profits in the virtual currency market, investors are exposed to the potential for a series of tricks against them. It should be noted that.
SEC seeks strong legal action
The SEC filed a complaint charging the company with five counts of violating fraud and market manipulation laws. It seeks a permanent injunction against all defendants and certain individuals from serving as officers or directors. Some of them agreed to settle their cases by agreeing to abide by SEC regulations, pending court approval.
Armando and Hernandez are among those who agreed. However, the incident is emblematic of the increased regulatory focus on the crypto market to prevent further manipulation and protect investors from fraud.
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