Last week, the Department of Justice announced charges against over a dozen individuals and entities, arguing these market makers were actually wash trading funds and defrauding people.
PS: I'll be at Flyover Fintech in Lincoln, Nebraska on Monday.
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Last week, the U.S. Department of Justice brought charges against a number of people and companies including Gotbit, CLS Global, MyTrade, and ZM Quant, alleging these companies were wash trading cryptos, and their operators and some token promoters were defrauding investors as a result.
Wash trading isn't exactly a massive secret in this industry – as I'll get to further down – but it's still a market signal that can portend poorly.
Alexey Andryunin told former CoinDesk reporter Anna Baydakova in 2019 that he co-founded a company designed to make it appear that random small-cap cryptocurrencies had real trading volume, with the express purpose of making these tokens appear active enough to secure a listing on CoinMarketCap and draw attention from larger companies.
At the time, Andryunin said, "The business is not entirely ethical."
Five years later, prosecutors appear to agree. Andryunin was arrested in Portugal for extradition to the U.S.
You can read Anna's 2019 report at this link.
The other interesting detail: The FBI worked on its own fake token, with a real contract you could track on-chain, called NexFundAI. Its website, which now features a massive "FBI" banner, looked remarkably legit – that is to say, like a lot of other AI-focused crypto tokens making vague promises but promising the moon.
Tuesday
If you’ve got thoughts or questions on what I should discuss next week or any other feedback you’d like to share, feel free to email me at nik@coindesk.com or find me on Twitter @nikhileshde.
You can also join the group conversation on Telegram.
See ya’ll next week!
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