MyTrade founder Liu Zhou has been fined $10,000 after admitting that his crypto market-making platform used automated bots to create fake trading activity.
Federal prosecutors said the bots carried out wash trades involving around 60 cryptocurrencies.
The transactions were designed to make tokens appear more active than they really were.
Zhou pleaded guilty to conspiracy to commit market manipulation and wire fraud.
Liu Zhou receives a $10,000 fine
A federal court in Boston ordered Zhou to pay a $10,000 fine for his role in the scheme.
U.S. District Judge Angel Kelley imposed the sentence, according to the Department of Justice.
Zhou is 41 years old and is a Canadian citizen and Chinese national.
Prosecutors charged Zhou and 17 other alleged co-conspirators in October 2024.
He later admitted to taking part in a conspiracy involving market manipulation and wire fraud.
Zhou operated MyTrade, a crypto market-making business that offered its services through the MyTrade MM website and app.
One of its products was called “Volume Support.”
The service allowed crypto projects to choose how much trading activity they wanted to show on selected exchanges.
MyTrade then used bots to repeatedly buy and sell the same assets.
The trades did not represent normal buying and selling between independent market participants.
Instead, they created the appearance of higher trading volume.
An FBI token helped expose the operation
Investigators uncovered the service through an undercover operation involving NexFundAI.
The FBI created the fake crypto project as part of its investigation.
Authorities launched a website and issued a token on Ethereum.
The NexFundAI token was traded on Uniswap before investigators shut down the operation.
Undercover agents then approached crypto market makers while pretending to represent the project.
The conversations gave investigators information about how MyTrade’s services worked.
According to prosecutors, Zhou openly described how the bots could trade the same asset between buyers and sellers controlled by the system.
“MyTrade MM does self-trades — a buy and a sell in the same second,” Zhou said, according to the DOJ.
Prosecutors also said Zhou discussed using the bots to create pump-and-dump activity.
In another conversation cited by the government, Zhou explained that the goal was to attract outside buyers.
Once real traders entered the market, they could end up buying assets whose apparent activity had been artificially created.
MyTrade’s bots handled millions of dollars in trades
The scale of the activity was significant.
According to prosecutors, MyTrade’s bots generated millions of dollars in wash trades every day.
The service was used for about 60 cryptocurrencies.
MyTrade continued offering Volume Support to dozens of customers as recently as October 1, 2024, the DOJ said.
The company has since agreed to stop the service.
As part of Zhou’s guilty plea, MyTrade agreed to permanently disable the bots used to create the artificial trades.
The company also had to publish a statement on its website acknowledging that the service was illegal.
The notice states that its “Volume Support” product was a form of wash trading and violated US law.
What is wash trading?
Wash trading happens when the same party, or parties working together, effectively buys and sells an asset to create the appearance of real market activity.
The trades can make a token look more popular or liquid than it actually is.
For crypto projects, higher reported volume can attract attention from traders and investors.
But when the volume is artificially created, it gives the market a misleading picture.
That is why regulators treat this type of activity as market manipulation.
The FBI used a fake crypto project
The NexFundAI operation is also notable because investigators did not simply monitor an existing token.
They created their own fake project and token to approach suspected market manipulators.
The operation gave undercover agents a way to test what market-making companies were willing to offer.
In MyTrade’s case, the investigation produced evidence about the company’s bots and its Volume Support product.
It also showed how automated trading systems could be used to create activity that looked legitimate from the outside.
US authorities are watching crypto market manipulation
Zhou’s case is part of a wider effort by US authorities to target misleading activity in digital asset markets.
Regulators have increased their focus on artificial trading volume, fraudulent token promotions and other forms of market manipulation.
The attention is not limited to crypto exchanges.
Prediction markets have also faced scrutiny.
In July, former US Representative George Santos reached a settlement with the Commodity Futures Trading Commission over trades on Kalshi.
Santos agreed to return $17,569.98 in gains, pay a $17,500 penalty and accept a three-year ban from trading on CFTC-registered platforms.
The CFTC had accused him of making misleading public statements while trading on whether he would attend President Donald Trump’s State of the Union address.
Santos did not admit or deny the findings.
Other countries are investigating similar activity
Market manipulation is also drawing attention outside the United States.
South Korean authorities have examined more than 40 suspected crypto market-manipulation cases since the country’s Virtual Asset User Protection Act came into effect.
More than 30 cases were reportedly sent to investigative agencies.
Authorities identified 25 suspects, while the average alleged illegal gain was around 1.4 billion won, or roughly $940,000, per case.
The numbers show that concerns about artificial trading are not limited to the US market.
What the MyTrade case means for crypto projects
The case sends a simple message to crypto companies.
Calling a service “market making” or “volume support” does not make artificial trading legal.
If bots are being used to create fake volume through coordinated buying and selling, regulators can treat that activity as market manipulation.
The undercover NexFundAI operation also shows how far investigators are willing to go when examining suspected misconduct.
For crypto projects and market-making firms, the case is another reminder that trading volume needs to come from genuine market activity.
Artificial numbers may make a token look busy for a while.
But they can also attract the attention of regulators and prosecutors.