The U.S. Department of Justice (DOJ) recently published a press release announcing charges against 18 individuals and entities alleging "widespread fraud and manipulation in the cryptocurrency markets." According to the press release, the defendants include "the leaders of four cryptocurrency companies, four cryptocurrency financial services firms (known as 'market makers') and employees at those firms." The press release states that "the defendants who created cryptocurrency companies made false statements about their cryptocurrencies ('tokens') and executed sham trades in those tokens ('wash trades') to create the appearance of trading activity that would make the tokens look like good investments." The market makers and their employees are charged with allegedly wash trading or conspiring to wash trade. The press release notes that as part of the enforcement action, DOJ has seized more than $25 million in cryptocurrency and has deactivated "trading bots responsible for millions of dollars' worth of wash trades for approximately 60 different cryptocurrencies."
In a parallel action, the SEC published a press release announcing "fraud charges against three companies purporting to be market makers and nine individuals for engaging in schemes to manipulate the markets for various crypto assets being offered and sold as securities to retail investors." According to the SEC press release, "crypto asset promoters ... hired so-called market makers ... to provide market-manipulation-as-a-service, which included generating artificial trading volume or manipulating the price of crypto assets that the [p]romoters offered and sold as securities to retail investors in unregistered transactions." The press release notes that one market maker allegedly "used algorithms (or bots) that, at times, generated quadrillions of transactions and billions of dollars of artificial trading volume each day."
In another recent press release, the SEC announced that it has charged a well-known Chicago-based digital asset trading company "with operating as an unregistered dealer in more than $2 billion of crypto assets offered and sold as securities, in violation of the registration requirements of the federal securities laws that are designed to protect investors." In a quote from the press release, an SEC official said, "Despite frequent protestations by the industry that sales of crypto assets are all akin to sales of commodities, our complaint alleges ... the offer and sale of the crypto assets at issue in this case as investments in securities, and [defendant] profited from its dealer activity in these assets without providing investors and the market with the important protections afforded by registration."
For more information, please refer to the following links:
- Eighteen Individuals and Entities Charged in International Operation Targeting Widespread Fraud and Manipulation in the Cryptocurrency Markets
- SEC Charges Three So-Called Market Makers and Nine Individuals in Crackdown on Manipulation of Crypto Assets Offered and Sold as Securities
- SEC Charges [] for Operating as an Unregistered Dealer in the Crypto Asset Markets
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