The U.S. Securities and Exchange Commission (SEC) has charged multiple market makers and individuals with manipulating crypto asset markets, alleging they created fake trading activity to mislead retail investors. These schemes, including practices like wash trading, aimed to fabricate the illusion of active trading, violating securities laws. The SEC seeks penalties, including bans and disgorgement, while parallel criminal investigations are also underway.
SEC Hits Market Makers With Fraud Charges for Misleading Crypto Investors
This article was published more than a year ago. Some information may no longer be current.
WRITTEN BY
SHARE
SEC Charges Market Makers and Individuals in Crypto Fraud Case
The U.S. Securities and Exchange Commission (SEC) announced fraud charges against three so-called market makers and nine individuals on Wednesday “for engaging in schemes to manipulate the markets for various crypto assets being offered and sold as securities to retail investors.” The accused allegedly created false trading activity to mislead investors. The SEC highlighted that these schemes harmed retail investors, violating securities laws by creating the illusion of a legitimate trading market.
According to the SEC, Russell Armand, Maxwell Hernandez, Manpreet Singh Kohli, Nam Tran, and Vy Pham hired ZM Quant and Gotbit to manipulate trading volumes. The regulator explained:
The schemes were intended to induce investor victims to purchase the crypto assets by creating the false appearance of an active trading market for them.
These fraudulent activities included practices like wash trading. Another company, CLS Global, is also accused of manipulating the market of a crypto asset created under FBI direction as part of a parallel investigation.
The SEC’s complaints, filed in the U.S. District Court for Massachusetts, claim all defendants violated anti-fraud and market manipulation provisions. The securities watchdog seeks permanent injunctions, disgorgement of gains, civil penalties, and officer and director bans for some defendants.
The FBI and U.S. Attorney’s Office have also initiated parallel criminal actions. Defendants Armand, Hernandez, and Pham have agreed to settlements, which are pending court approval and will include penalties and bans on holding executive positions. The SEC stated:
Today’s enforcement actions demonstrate, once more, that retail investors are being victimized by fraudulent activity by institutional actors in the markets for crypto assets.
What do you think about the SEC’s crackdown on crypto market manipulation? Let us know in the comments section below.
