SEC charges market makers for misleading crypto investors

The U.S. Securities and Exchange Commission (SEC) has filed fraud charges against multiple market makers and individuals, accusing them of manipulating the trading of various crypto assets.

These individuals allegedly engaged in practices such as wash trading to create the illusion of active markets, misleading retail investors and violating securities laws.

According to the SEC, this fraudulent activity misled investors into believing they were participating in legitimate trading, resulting in financial losses.

The defendants named in the case include Russell Armand, Maxwell Hernandez, Manpreet Singh Kohli, Nam Tran, and Vy Pham.

The SEC claims that these individuals hired firms like ZM Quant and Gotbit to artificially inflate trading volumes for various crypto assets, creating a false appearance of demand.

Additionally, CLS Global was implicated for similar manipulation involving a crypto asset created under FBI oversight as part of a parallel investigation.

The SEC filed the complaints in the U.S. District Court for Massachusetts, alleging that all defendants violated anti-fraud and market manipulation laws.

The regulator seeks permanent injunctions, the return of illicit profits, civil penalties, and the imposition of officer and director bans on certain defendants.

According to the SEC, some individuals, including Armand, Hernandez, and Pham, have already agreed to settlements.

These agreements, pending court approval, include penalties and prohibitions from holding executive positions.

The SEC emphasised the impact on retail investors, stating, "Today’s enforcement actions demonstrate that retail investors are being victimized by fraudulent activity by institutional actors in the markets for crypto assets."

Parallel criminal proceedings by the FBI and the U.S. Attorney’s Office are also underway against the defendants.