The United States Attorney’s Office, District of Massachusetts, has announced the charging of eighteen entities and individuals for a crime involving market manipulation and fraud. Authorities have seized cryptocurrencies worth approximately $25 million, with the fraud sharing its links to the concept of pump and dump. ZM Quant, CLS Global, MyTrade, and their employees are facing allegations of executing wash trades and conspiring with other parties to execute wash trades on behalf of NexFundAI.
They employed a strategy of fabricating false statements and executing sham trades, commonly referred to as wash trades. This would suggest an increase in trading volume, which would draw in investors and traders and enhance their perceived value as a profitable investment. A surge in the number of buyers and investors eventually led to a price increase. Defendants then sold their tokens at artificially inflated prices.
One reason it shares similarities with the pump-and-dump policy is that the methods are essentially the same. Investments are made to make a product look so good that everyone comes on board. Original investors later withdraw their capital along with significant profit shares.
Joshua Levy, the Acting US Attorney, called this investigation the first of its kind in the crypto industry. Joshua emphasized that traditional markets long ago outlawed the practice, and he saw no reason to treat the crypto market differently. The message, he added, was to convey that fraud would occur if anyone made false statements to deceive investors. Joshua urged investors to exercise caution at the time of making investments, especially in the digital world, or digital assets.
Jodi Cohen, Special Agent in Charge of the Federal Bureau of Investigation, Boston Division, said that the discovery was a new twist to the old-school financial scheme. The US Securities & Exchange Commission, or SEC, has also filed a civil complaint with allegations of violating security laws.
The discovery of the scam has likely contributed to the declining trend of several cryptocurrencies. Investors are bound to lose their confidence at a time when they are exploring new territories for investments. The global crypto market is down by 2.21% at press time. Bitcoin tokens are essentially testing the support level at $60,000, and ETH is attempting to resist moving below $2,300. If the market continues to decline, it could potentially reach a lower low in October 2024.
Allegations of market manipulation and wash trading are serious, as several investors are believed to have lost their money. If true, then those charged under relevant sections by competent authorities will have to find a way to reverse their deeds and return the losses.
It remains to be seen whether they will justify their acts or plead guilty directly. One market maker defendant has already entered a guilty plea, stating that their primary goal was to locate additional buyers within the community or individuals who were not aware of the entire situation.