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U.S. Securities and Exchange Commission charges crypto market maker in a pump-and-dump of a worthless token

U.S. Securities and Exchange Commission charges crypto market maker in a pump-and-dump of a worthless token

SEC Chair

The worthless token in question is HYDRO of Hydro Protocol, which was supposed to grant holders access to the platform to build apps & businesses on Ethereum blockchain.

HYDRO was a classic pump-and-dump scheme, where the market maker called Moonwalker was manipulating the market by using a “bot” to submit buy & sell orders into the order-books on the exchanges, immediately canceling them, and printing fake volume, all with a goal to create an illusion of market activity and trading in the token.

U.S. Securities and Exchange Commission charges crypto market maker in a pump-and-dump of a worthless token

Apparently the HYDRO token listed on 17 different crypto exchanges and the “strategy” of the project was to list on as many low-volume exchanges as possible, with goal of creating an illusion of trading & demand for token, before approaching a large & established crypto exchange for listing.

Hydro must pay $2.8 million in fines for the sale of a worthless token. While the market maker became forced to pay $42,000 for market manipulation.

Wash trading and pump-and-dumps are part of a bigger problem in the crypto industry, where the projects face enormous pressure from the trading community, investors and exchanges to achieve unrealistically high returns and volume numbers.

The project loses since they are conducting questionable & illegal activities that will long-term hurt them.

The investors and trading community are at a loss since they cannot trust liquidity, volume or the price of the token.

The exchanges are at a loss since their traders are exposed to tokens that will in the end result in losses.

Very surprisingly, since 2013 till today, the SEC has charged only on two occasions for market manipulation. I expect that number to increase in the coming years as the regulator and crypto industry get a better awareness of the harmful activities done by unethical market makers.

U.S. Securities and Exchange Commission charges crypto market maker in a pump-and-dump of a worthless token

Written by Anton Golub

Anton is a Strategic Advisor of Pazar, decentralized OTC marketplace. Anton founded & served as CEO of flovtec, Swiss market-maker providing liquidity solutions to digital asset exchanges, token issuers & protocols and offering investment products for professional & institutional investors. In addition, Anton is also a co-founder of Trust Square AG, a pre-eminent blockchain technology hub located in Zurich’s financial district. Furthermore, Anton co-founded Lykke Corp, a blockchain-powered exchange to trade all assets with zero fees, where he served as a Chief Science Officer. Prior to Lykke, he worked as a quantitative researcher at Olsen Ltd (successor to Olsen & Associates, founded in 1985), a boutique investment firm that pioneered the field of high-frequency trading.

As a Marie Curie Research Fellow at the Alliance Manchester Business School, Anton worked on high-frequency trading, market microstructure and flash crashes. In 2011, invited to participate in the Foresight Project – The Future of Computer Trading in Financial Markets. An international project on algorithmic trading funded by HM Treasury in the UK. Anton has also become involved in several research projects backed by the European Union (EU). Furthermore, served on the Supervisory Board for the BigDataFinance project funded through Horizon 2020. He has co-authored 13 academic papers and two books.

Cryptocurrency & Blockchain