What does market manipulation by a crypto market maker look like?

Wash trading

The US commodities regulator defines wash trading as making trades that look like real buying and selling, without taking any market risk or changing your position.¹ US commodities law prohibits it.¹

The FBI puts it simply: one trader, or traders working together, buy and sell the same asset to create misleading market information.²

Spoofing

Spoofing means placing buy or sell orders you mean to cancel before anyone can trade with them.¹

Operation Token Mirrors

In October 2024, US prosecutors charged 18 people and companies, including four crypto market making firms and their staff.⁴ They called these the first criminal charges against crypto market makers for wash trading.⁴

The FBI created its own token, NexFundAI, as part of the investigation.⁴ More than $25 million in crypto was seized, and trading bots that made wash trades for about 60 tokens were switched off.⁴

The SEC said the firms offered "market manipulation as a service", producing billions of dollars of fake trading volume each day.³

What happened next

• CLS Global agreed to plead guilty, to pay $428,059, and to be banned from US crypto markets.⁵
• Its proposal to the FBI's token had a section called "Volume Support".⁵
• Gotbit's founder was sentenced to eight months in prison, and the firm forfeited about $23 million and must stop operating.⁶
• In August 2026 the SEC said Gotbit had agreed to settle the SEC's own case, subject to the court's approval.⁷
• The FBI's affidavit said Gotbit's created volume for one token was about 16 times the real market volume.²

Red flags

• A fee that depends on trading volume, rather than on spreads or prices being shown.²
• A product sold as "volume support".⁵
• Talk of pushing the price.²
• Profit-sharing or guaranteed profit.⁸
• Selling that doesn't match the token's release schedule.⁸