A U.S. enforcement case against alleged crypto market manipulation is once again putting the spotlight on wash trading and the blurry line between market makers and market manipulators.
Federal prosecutors in California this week charged 10 individuals tied to firms including Gotbit, Vortex, Antier and Contrarian, accusing them of coordinating trades to inflate token prices and volumes before selling into the artificial demand. The case stemmed from an undercover FBI operation in which agents created their own token to identify firms offering manipulation services.
Defendants marketed strategies to boost trading activity that in reality amounted to pump-and-dump schemes and wash trading, leaving evidence that is far more common than expected, crypto experts Jason Fernandes from AdLunam and Stefan Muehlbauer from Certik told CoinDesk via Telegram interviews..
“Yes, despite increased enforcement, wash trading continues to be a pervasive issue, particularly among lower-cap tokens and on unregulated exchanges,” Muehlbauer said, while Fernandes stated, iIt’s far more common than most investors realize,”. They both agreed the scale remains high.
Gotbit Founder Aleksei Andriunin, included in the recent Department of Justice indictments, pleaded guilty to two counts of wire fraud and conspiracy to commit market manipulation last year, and agreed to forfeit $23 million. U.S. prosecutors described his crimes as a “wide-ranging conspiracy” to manipulate token prices for paying clients.
Inflating volumes becomes a shortcut
The details of market manipulation exposed by the DOJ are impactful, 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, listings 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 is far more common than investors believe or expect, particularly in long-tail tokens and on smaller exchanges where oversight is limited, Fernandes added.
“In many cases, it’s not just rogue actors. It’s projects, market-making firms and even venues themselves, all benefiting from higher reported volume.”
The DOJ said the firms 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 pointed to inflated activity across crypto markets. A Columbia University analysis of Polymarket found roughly 25% of historical volume showed signs of wash trading, while earlier Dune Analytics data suggested tens of billions in NFT volume on Ethereum stemmed from similar activity.
Wash trading still a ‘pervasive issue’: Certik
“The recent actions by 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 incentives 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: illusion of value,” Muehlbauer said. “That illusion has real consequences,” particularly because artificial volume distorts price discovery, masks weak liquidity and can funnel capital based on signals that are not real. “High volume signals to investors and exchanges that a token is hot and liquid.”
“Victims are investors relying on that liquidity and high volume data,” Fernandes said. “Wash trading distorts markets, leading to “mispriced risk and capital flowing based on signals that aren’t real.”
Enforcement will benefit the market
The latest DOJ case stands out may bring a glimmer of hope to the industry.
“What’s notable isn’t just the charge but the method,” Fernandes said. “When the FBI is creating tokens to catch market manipulation, you’re no longer in a grey area. This is the U.S. signaling that crypto market structure is now firmly in enforcement territory.”
For market participants, the line between legitimate liquidity provision and manipulation is coming under sharper scrutiny, said the AdLunam co-founder.
Efforts to detect and reduce wash trading are improving. Regulated exchanges are deploying more sophisticated surveillance 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 for now, the DOJ case shone a light on just how pervasive wash trading continues to be, undermining trust in crypto markets.
“Crypto is moving from a loosely policed frontier market to something that has to withstand institutional scrutiny. An irony is that enforcement like this may 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.”