How do token makers and market makers set up loans, and who gets hurt?

"BOSTON - Gotbit Consulting LLC ( Gotbit ), a financial services firm known in the cryptocurrency industry as a " market maker ," and its founder pleaded guilty today in federal court in Boston to criminal charges relating to Gotbit's fraudulent manipulation of cryptocurrency trading volume on behalf of client cryptocurrency companies."

"Defendant GOTBIT CONSULTING LLC (" GOTBIT ") was a company registered in Belize. GOTBIT operated both inside and outside the United States."

"That artificial volume served as bait: lure in buyers who believe there’s real demand, then sell off holdings into that manufactured liquidity."

"According to federal prosecutors, the firm spent years generating artificial trading volume on behalf of client cryptocurrency companies, including Robo Inu and Saitama, creating a false picture of market demand that real investors relied on."

"GOTBIT had a public website ("https:// gotbit .io/") on which it purported to offer " market making" services for cryptocurrencies, such as the active monitoring of cryptocurrency trading and price fluctuations"

"The core accusation is straightforward: trading bots generating fake volume, coordinated wash trades inflating prices, and real investors on the receiving end of a manufactured illusion of market demand."

"Gotbit admitted in connection with its plea that it engaged in manipulative trades to artificially increase the trading price and volume of tokens for clients that included Robo Inu and Saitama."

"When hired to manufacture volume, wash traders buy and sell nearly equal amounts, repeatedly turning over the same inventory."

"According to the SEC’s filings, Gotbit allegedly carried out the scheme through wash trading , generating coordinated self-trades with no genuine economic purpose to artificially inflate the Robo Inu token’s apparent trading volume and attract unsuspecting investors."

"When also tasked with selling issuer holdings, trading becomes markedly more one-sided, with sales exceeding purchases."

"The announcement, made on March 30, 2026, named defendants tied to four market-making firms: Gotbit, Vortex, Antier, and Contrarian."

"Wash trading refers to buying and selling the same asset through coordinated or self-directed trades that create artificial volume or price movements without genuine market activity."

"The results show that similar reported trading volume can mask fundamentally different economic activity as contractual objectives shape whether manipulation recycles inventory or liquidates issuer holdings."

"As part of the criminal resolution, Gotbit agreed to cease all operations and forfeit approximately $22.8 million in seized cryptocurrency ."

"Legitimate market makers provide a genuine service, narrowing bid-ask spreads and improving price discovery."

"In this respect, we note that it appears that if the company engages in the proposed Coin buyback plan while, at the same time, it also engages in a continuous distribution of the Coins, such activity may be inconsistent with Rule 102 of Regulation M."

"As of April 30, 2021, we hold 46.0 million Salt Tokens in treasury and expect this amount to increase as Salt Tokens are redeemed through the Platform."

"We acknowledge the Regulation M concerns the SEC has with respect to the “call” option of the Company made part of the Coin “Buyback” provisions."

"We have the ability to permanently retire and terminate Salt Tokens held in treasury, which would reduce the maximum amount of tokens available and could impact the price of outstanding Salt Tokens."

"Put another way, the Company could not exercise the subject “call” option so long as any Coins were then available for sale."

"The current price of Salt Tokens for use on the Platform is set at $0.15 per token, which is equal to the 60-day moving average price of the Salt Tokens according to the CoinMarketCap website"

"In addition to the above, we acknowledge the Regulation M concerns the SEC has with respect to the “stabilization” language related to the Coins included in the Offering Circular. This language will be removed in the next iteration of the Offering Circular."

"The pricing information reported on the CoinMarketCap website is based on information it receives from secondary trading exchanges that are unregulated, represent a low volume of trading in Salt Tokens and may include fraudulent or improper trades."

"Fraudulent trading in Salt Tokens may also cause volatility in the price of Salt Tokens and result in their price not being an accurate reflection of their value."

"Using loan-level data, I find that origination lenders with extensive borrower relationships and more reputational capital at stake are more likely to serve as market makers."

"A project hands a market maker a pile of tokens before or at listing, sometimes at zero upfront cost. The market maker provides liquidity on exchanges, but also retains the right to sell those tokens into market demand."

"Greater participation of origination lenders as market makers is associated with lower trading costs for their borrowers' loans."

"The CEV model prices these puts 10–28% higher than Black–Scholes (with matched ATM volatility)"

"The fact that price manipulation may force the option holders to exercise before the maturity implies that regulators must monitor stock prices and options sellers activity continuously."

"Lenders benefit from being market makers by maintaining strong subsequent lending relationships with their borrowers."

"Collectively, this evidence is consistent with origination lenders' participation in the secondary market being motivated by reducing trading frictions rather than market making profits."