TLDR
- Liu Zhou, MyTrade’s founder, pleaded guilty to crypto market manipulation
- Used wash trading bots to artificially inflate trading volumes
- Faces maximum 5-year prison sentence, with 2025 sentencing date
- MyTrade’s “Volume Support” service processed millions of fake trades daily
- Major firms like Jane Street and Jump Crypto have reduced US crypto operations
Liu Zhou, founder of cryptocurrency market maker MyTrade, has pleaded guilty to orchestrating a large-scale market manipulation scheme that processed millions of fraudulent transactions daily.
The case, heard in a Massachusetts federal court, reveals how Zhou used automated trading bots to create fake trading activity and mislead investors.
According to court documents, Zhou’s company offered a service called “Volume Support,” which used wash trading to artificially boost the trading volumes of specific cryptocurrencies.
Wash trading involves repeatedly buying and selling the same asset to create an illusion of market activity.
Assistant prosecutors explained that Zhou’s scheme worked by programming bots to execute countless trades back and forth, often doubling or tripling the apparent trading activity for client cryptocurrencies.
These artificial transactions made certain digital assets appear more popular and actively traded than they actually were.
“Zhou’s tactics created an illusion of market demand, misleading investors who believed they were seeing genuine interest in these digital assets,” said Assistant U.S. Attorney Rachel Lahey during the proceedings.
The prosecution demonstrated how MyTrade’s activities directly impacted market perception and investor behavior.
The case has drawn attention to the broader issue of market manipulation in cryptocurrency trading. Six months before Zhou’s guilty plea, another market maker, DWF Labs, faced similar accusations when the Wall Street Journal reported alleged wash trading worth $300 million on Binance. DWF Labs denied these allegations.
U.S. Attorney Rachael Rollins emphasized the breach of trust inherent in Zhou’s actions.
“Investors put their trust in MyTrade’s credibility, not realizing that what they saw was an orchestrated illusion,”
she stated during the court proceedings.
The prosecution team presented evidence showing how MyTrade’s Volume Support service systematically deceived market participants.
The guilty plea comes at a time when the cryptocurrency industry faces increased scrutiny from regulators and law enforcement agencies.
Zhou’s admission of guilt marks one of the first major convictions related to wash trading in the cryptocurrency space.
Court records reveal that MyTrade’s wash trading operation was sophisticated and widespread. The company’s automated systems could execute millions of trades per day, creating an artificial appearance of market depth and liquidity where little actually existed.
The impact of such manipulation extends beyond individual investors. Market analysts note that artificial trading volumes can distort price discovery mechanisms and create false impressions of market trends, affecting the entire cryptocurrency ecosystem.
Zhou’s activities occurred during a period of rapid growth in the cryptocurrency market, when many new investors were entering the space.
The prosecution argued that his actions took advantage of this influx of new market participants who may not have fully understood the signs of market manipulation.
The case has coincided with shifts in the broader crypto trading landscape. Notable market makers Jane Street and Jump Crypto have scaled back their U.S. cryptocurrency operations, citing regulatory uncertainty. Jane Street has completely withdrawn from crypto trading in the United States.
MyTrade’s Volume Support service has been shut down following the investigation. Prosecutors detailed how the service allowed clients to specify desired trading volumes, with MyTrade’s systems then generating enough wash trades to meet these targets.
The guilty plea carries serious consequences for Zhou, who now faces up to five years in prison. His sentencing has been scheduled for February 2025, where a federal judge will determine the final punishment based on sentencing guidelines and other factors.
Law enforcement officials have stated that this case represents part of their ongoing efforts to maintain market integrity.
“We are committed to rooting out market manipulation at every level,” Rollins stated, indicating that similar cases may be under investigation.
The latest development in this case is Zhou’s guilty plea, entered in the Massachusetts federal court. The plea agreement’s details remain under seal, but prosecutors have confirmed that Zhou has admitted to both market manipulation and conspiracy to commit fraud.
