MyTrade founder pleads guilty to cryptocurrency manipulation case

TLDR

• Liu Zhou, the founder of MyTrade, pleaded guilty to manipulating the cryptocurrency market
• Used cleaning trading bots to artificially inflate trading volumes
• Faces a maximum sentence of 5 years in prison with a sentencing date in 2025
• MyTrade’s “Volume Support” service handled millions of fake trades every day
• Major firms such as Jane Street and Jump Crypto have scaled back cryptocurrency operations in the US

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Liu Zhou, founder of cryptocurrency market maker MyTrade pleaded guilty to organizing a large-scale market manipulation scheme processed millions of fraudulent transactions every day.

The case, heard in federal court in Massachusetts, shows how Zhou used automated trading bots to create fake trading activity and mislead investors.

According to court documents, Zhou’s company offered a service called “Volume Boost” that used wash trading to artificially increase trading volumes of certain cryptocurrencies.

Wash trading involves repeatedly buying and selling the same asset to create the illusion of market activity.

Assistant prosecutors explained that Zhou’s scheme worked by programming bots to make countless back-and-forth trades, often doubling or tripling the client’s apparent cryptocurrency trading activity.

These artificial transactions made certain digital assets more popular and active than they actually were.

“Zhou’s tactics created the illusion of market demand, misleading investors into believing they were seeing genuine interest in these digital assets,” Assistant U.S. Attorney Rachel Lahey said during the hearing.

Prosecutors demonstrated how MyTrade’s activities directly affected market perception and investor behavior.

The case drew attention to the broader issue of market manipulation in cryptocurrency trading. Six months before Zhou’s guilty plea, another market maker, DWF Labs, faced similar allegations when the Wall Street Journal reported an alleged $300 million trade on Binance. DWF Labs has denied the allegations.

US Attorney Rachel Rollins emphasized breach of trust inherent in Zhou’s actions.

“Investors place their trust in MyTrade, not realizing that what they saw was an orchestrated illusion.”

– she said during the court session.

The prosecutor’s office presented evidence of how the Volume Support MyTrade service systematically deceived market participants.

The guilty plea comes at a time when the cryptocurrency industry is facing increased scrutiny from regulators and law enforcement.

Zhou’s guilty plea marks one of the first major convictions related to the cryptocurrency trading business.

Court records show that MyTrade’s trading operation was complex and widespread. The company’s automated systems could execute millions of trades per day, creating the artificial appearance of market depth and liquidity where there really was little.

The impact of such manipulations goes beyond individual investors. Market analysts note that artificial trading volumes can distort price determination mechanisms and create false impressions of market trends, affecting the entire cryptocurrency ecosystem.

Zhou’s activities coincided with the period of rapid growth of the cryptocurrency market, when many new investors appeared on the market.

Prosecutors argued that his actions took advantage of an influx of new market participants who may not have fully understood the signs of market manipulation.

The case coincided with changes in the broader cryptotrading landscape. Prominent market makers Jane Street and Jump Crypto have scaled back their cryptocurrency operations in the US, citing regulatory uncertainty. Jane Street has completely abandoned cryptocurrency trading in the US.

MyTrade’s volume support service has been shut down following an investigation. Prosecutors detailed how the service allowed customers to specify desired trade volumes, and MyTrade’s systems would then generate enough trades to meet those goals.

The guilty plea carries serious consequences for Zhou, who now faces up to five years in prison. His sentencing is scheduled for February 2025, where a federal judge will determine the final sentence based on sentencing guidelines and other factors.

Law enforcement agencies said the case is part of their ongoing efforts to maintain the integrity of the market.

“We are committed to rooting out market manipulation at all levels,” Rollins said, noting that such cases could be investigated.

The latest development in the case is Zhou’s guilty plea entered in federal court in Massachusetts. Details of the plea deal remain under wraps, but prosecutors confirmed that Zhou pleaded guilty to both market manipulation and conspiracy to defraud.