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The FBI’s fake cryptocurrency token unraveled a landmark market manipulation case, leading a founder to plead guilty to running automated wash trades across exchanges.
In FBI-Created Token’s Trap, Crypto Mogul’s Empire Collapses
The U.S. Department of Justice (DOJ) announced on Wednesday that Liu Zhou, the founder of Mytrade, a cryptocurrency financial services firm, has pled guilty to federal charges of conspiracy to commit market manipulation and wire fraud. The U.S. Attorney’s Office in the District of Massachusetts emphasized that Zhou’s plea is the “first guilty plea of a cryptocurrency ‘market maker,’” a firm role centered on generating liquidity for digital assets.
Zhou, 39, was shown to have coordinated wash trading schemes on Mytrade’s platform, Mytrade MM, to falsely boost trading volume and market value for cryptocurrency clients across various exchanges. His sentencing is scheduled for Feb. 27, 2025, by U.S. District Judge Angel Kelley. The DOJ explained:
The charge of conspiracy to commit market manipulation and wire fraud provides for a sentence of up to five years in prison, up to three years of supervised release, a fine of up to $250,000 to twice the gross gain or loss from the offense, restitution and forfeiture.
Federal investigators discovered Zhou’s activities through an undercover operation involving NexfundAI, a fictitious cryptocurrency project designed to expose unlawful trading practices. Zhou’s platform allegedly provided “the wash trading of client cryptocurrencies across multiple cryptocurrency exchanges” via automated “volume bots.” His service, marketed to cryptocurrency companies as “Volume Support,” relied on bots to engage in wash trading.
The DOJ detailed:
Mytrade MM’s unlawful wash trading service was identified through an undercover law enforcement operation. The investigation included the creation of NexFundAI, a purported cryptocurrency company … and an Ethereum-based token that traded on the Uniswap cryptocurrency exchange before being disabled by law enforcement.
As part of Zhou’s plea deal, “MyTrade MM was required to cease providing ‘Volume Support’ services and to permanently deactivate its wash trading bots, which had been responsible for millions of dollars’ worth of daily wash trades for approximately 60 different cryptocurrencies,” the DOJ described.