A US enforcement case against alleged crypto market manipulation puts the spotlight once again on wash trading and the blurred line between market makers and market manipulators.
Federal prosecutors in California this week indicted 10 people linked to firms including Gotbit, Vortex, Antier and Contrarian, accusing them of coordinating trades to inflate token prices and volumes before selling to the artificial demand.
The case stemmed from an undercover FBI operation in which agents created their own token to identify firms offering tampering services.
Defendants marketed strategies to increase trading activity that in reality amounted to pump-and-dump schemes and wash trading, leaving evidence far more common than expected, crypto experts Jason Fernandes of AdLunam and Stefan Muehlbauer of Certik told CoinDesk via Telegram interviews.
“Despite increased enforcement, wash trading continues to be a pervasive problem, especially among lower-cap tokens and on unregulated exchanges,” Muehlbauer said, while Fernandes said “it’s far more common than most investors realize.”
Gotbit founder Aleksei Andriunin, included in the latest Justice Department charges, pleaded guilty to two counts of fraud and conspiracy to commit market manipulation last year and agreed to forfeit $23 million. US prosecutors described his crimes as a “wide-ranging conspiracy” to manipulate token prices for paying clients.
Pumping up volumes becomes a shortcut
The details of market manipulation uncovered by the DOJ are influential, but the underlying behavior is not.
“Wash trading exists because in crypto liquidity is perception,” said Jason Fernandes, co-founder of AdLunam. “Volume attracts attention, IPOs and capital, so inflating it becomes a shortcut to relevance.”
The mechanics are straightforward: coordinated accounts trade back and forth to simulate demand, often outsourced to market makers paid to create the illusion of organic flow.
It’s far more common than investors think or expect, especially in long-tail tokens and on smaller exchanges where oversight is limited, Fernandes added.
“In many cases, it’s not just rogue players. It’s projects, market-making companies and even venues themselves that all benefit from higher reported volume.”
The DOJ said the firms included in its indictment used coordinated trading to inflate volumes and prices, ultimately selling tokens at artificially high levels to unsuspecting investors.
Recent research has repeatedly pointed to inflated activity across crypto markets. A Columbia University analysis of Polymarket found that about 25% of historical volume showed signs of wash trading, while previous Dune Analytics data suggested that tens of billions in NFT volume on Ethereum stemmed from similar activity.
Laundry trade still a ‘pervasive problem’: Certik
“The recent actions by the US Department of Justice send a clear signal,” said Stefan Muehlbauer, Head of US Government Affairs at CertiK. “The ‘Wild West’ era of crypto market manipulation is facing a coordinated, global crackdown. While these charges represent a major victory for market integrity, wash trading remains a significant concern.”
Despite years of investigation, the incentives behind the practice remain intact, he said. Token issuers often face pressure to meet listing requirements tied to trading volume, prompting some to turn to market makers to simulate activity or deploy bots that trade against themselves.
“The ‘why’ is simple: illusion of value,” Muehlbauer said. “That illusion has real consequences,” especially because artificial volume distorts price discovery, masks weak liquidity, and can channel capital based on signals that aren’t real. “High volume signals to investors and exchanges that a token is hot and liquid.”
“The victims are investors who rely on that liquidity and large amounts of data,” Fernandes said. “Wash trading distorts markets, leading to “mispriced risk and capital flows based on signals that are not real.”
Enforcement will benefit the market
The latest DOJ case stands out may bring a glimmer of hope to the industry.
“What is remarkable is not only the charge but the method,” Fernandes said. “When the FBI creates tokens to catch market manipulation, you are no longer in a gray area. This is the United States signaling that the crypto market structure is now firmly in the realm of enforcement.”
For market participants, the line between legitimate liquidity injection and manipulation is under closer scrutiny, the AdLunam co-founder said.
Efforts to detect and reduce laundering are improving. Regulated exchanges are implementing more sophisticated monitoring tools, while analysts are increasingly looking beyond headline volume to metrics such as order book depth, slippage and counterparty diversity.
Enforcement may ultimately push the market forward, although the DOJ case so far shined a light on how widespread laundering remains, undermining confidence in crypto markets.
“Crypto is moving from a loosely politicized frontier market to something that must withstand institutional scrutiny. An irony is that enforcement like this could ultimately strengthen the asset class,” Fernandes said.
In Muehlbauer’s words, “the message to the industry is clear: what was once brushed off as ‘market making’ is now being prosecuted as wire fraud and market manipulation.”
