A US law enforcement case against alleged crypto market manipulation once again puts the spotlight on wash trading and the blurred line between market makers and market manipulators.
Federal prosecutors in California this week indicted 10 people linked to companies including Gotbit, Vortex, Antier and Contrarian, accusing them of coordinating transactions to inflate token prices and volumes before selling to artificial demand. The case stems from a covert FBI operation in which agents created their own token to identify companies offering manipulation services.
The defendants marketed strategies to boost trading activity that effectively amounted to pump-and-dump schemes and wash trades, leaving evidence much more common than expected, crypto experts Jason Fernandes of AdLunam and Stefan Muehlbauer of Certik told CoinDesk via Telegram interviews.
“Yes, despite increased enforcement, wash trading continues to be a pervasive problem, especially among small-cap tokens and on unregulated exchanges,” Muehlbauer said, while Fernandes said, “It’s much more common than most investors realize.” They both agreed that the magnitude remains high.
Gotbit founder Aleksei Andriunin, included in recent Justice Department indictments, pleaded guilty to two counts of wire fraud and conspiracy to commit market manipulation last year, and agreed to forfeit $23 million. US prosecutors described his crimes as a “vast conspiracy” to manipulate token prices for paying customers.
Inflating volumes becomes a shortcut
The details of the market manipulations exposed by the DOJ are impactful, but the underlying behavior is not.
“Wash Trading exists because in crypto, liquidity is a perception,” said Jason Fernandes, co-founder of AdLunam. “Volume attracts attention, quotes and capital, so inflating it becomes a shortcut to relevance.”
The mechanisms are simple: coordinated accounts trade to simulate demand, often outsourced to market makers paid to create the illusion of organic flow.
This is much more common than investors believe or expect, especially in long-tail tokens and on smaller exchanges where oversight is limited, Fernandes added.
“In many cases, it’s not just dishonest actors. It’s projects, market-making companies, and even sites themselves, all of which benefit from higher reported volume.”
The DOJ said the companies included in their indictment used coordinated trading to inflate volumes and prices, ultimately selling tokens at artificially high levels to unsuspecting investors.
Recent research has repeatedly highlighted inflated activity in crypto markets. An analysis from Columbia University’s Polymarket found that around 25% of historical volume showed signs of wash trading, while earlier data from Dune Analytics suggested that tens of billions of NFT volumes on Ethereum came from similar activity.
Wash Trading remains a “pervasive problem”, according to Certik
“The recent actions of the U.S. Department of Justice send a clear signal,” said Stefan Muehlbauer, head of U.S. government affairs at CertiK. “The ‘Wild West’ era of crypto market manipulation is facing a coordinated global crackdown. While these indictments represent a major victory for market integrity, wash trading remains a significant concern.”
Despite years of scrutiny, the motivations behind the practice remain intact, he said. Token issuers often face pressure to meet exchange listing requirements tied to trading volume, leading some to turn to market makers to simulate activity or deploy bots that trade against themselves.
“The ‘why’ is simple: the illusion of value,” Muehlbauer said. “This illusion has real consequences,” not least because artificial volume distorts price discovery, masks low liquidity, and can channel capital based on signals that are not real. “High volume signals to investors and exchanges that a token is hot and liquid.”
“The victims are investors who rely on this liquidity and high data volumes,” Fernandes said. “Wash trading distorts markets, leading to “misassessment of risks and capital flows based on signals that are not real.”
The application will benefit the market
The latest standout DOJ case could provide a glimmer of hope for the industry.
“What is remarkable is not just the accusation but the method,” Fernandes said. “When the FBI creates tokens to detect market manipulation, you are no longer in a gray area. This is a signal from the United States that the structure of the crypto market is now firmly in enforcement territory.”
For market participants, the line between legitimate liquidity provision and manipulation is coming under greater scrutiny, the AdLunam co-founder said.
Efforts to detect and reduce wash trading are improving. Regulated exchanges are deploying more sophisticated monitoring tools, while analysts are increasingly looking beyond overall volume and increasingly turning to metrics such as order book depth, slippage and counterparty diversity.
The app could ultimately move the market forward, although for now, the DOJ case has shed light on how wash trading continues to be pervasive, undermining confidence in crypto markets.
“Crypto is moving from a lightly regulated frontier market to something that must withstand institutional scrutiny. The irony is that such enforcement could ultimately strengthen the asset class,” Fernandes said.
In Muehlbauer’s words, “the message to the industry is clear: what was once considered ‘market making’ is now being prosecuted for wire fraud and market manipulation.”
