Summary
- Liu Zhou, the founder of MyTrade, has been fined $10,000 for operating a wash trading service.
- In October 2024, Zhou and 17 others pleaded guilty in connection with this scheme.
- MyTrade provided a platform for clients to execute fictitious trades through automated bots.
Liu Zhou, the 41-year-old founder of cryptocurrency market maker MyTrade, has received a $10,000 fine for his involvement in a wash trading operation that inflated daily trading volumes across approximately 60 cryptocurrencies. Fortunately for him, he avoided incarceration.
On Thursday, U.S. District Judge Angel Kelley sentenced Zhou in a federal court in Boston, as reported by Law360. Zhou admitted to conspiracy charges related to market manipulation and wire fraud, having been charged alongside 17 accomplices in October 2024.
MyTrade operated its service transparently, allowing clients to access a dashboard on the MyTrade MM website where they could select the volume of wash trades they desired on various exchanges. This service, branded as "Volume Support," utilized bots to repeatedly buy and sell the same assets, thereby creating artificial trading volume. As of October 2024, the service had garnered a sizable client base.
Zhou was straightforward with potential clients about the operations of MyTrade MM, stating that the platform performed self-trades—executing buys and sells simultaneously. He explained that the volume bot could facilitate pump-and-dump schemes, aimed at attracting unsuspecting buyers to create profit at their expense. "We have to make [the other buyers] lose money in order to make profit," he remarked.
FBI's Counterstrategy
To investigate the situation, authorities established a fictitious crypto company named NexFundAI, which included a website and an Ethereum-based token that was traded on Uniswap until law enforcement intervened. This setup was used to request market-making services and document the responses.
This undercover operation led to charges against 18 individuals and entities in October 2024, which included market makers such as Gotbit, ZM Quant, and CLS Global.
As part of his plea deal, Zhou is mandated to cease the sale of Volume Support and permanently shut down the bots associated with it. Additionally, MyTrade is required to display a notice on its website declaring that volume support constitutes "a form of wash trading and illegal under U.S. law."