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Promote with Leviathan NewsDL News reports that legal experts are warning crypto market makers that some common liquidity tactics now risk being treated as unlawful market manipulation, especially as many tokens have suffered sharp price declines on thin liquidity. Dr. Rasit Tavus of LegalBlock argues that practices often marketed in Web3 as “liquidity support” or “market-making-as-a-service” can cross legal lines when they are designed to create a misleading picture of trading activity, price stability, or investor demand rather than to facilitate genuine two‑sided markets. These concerns are sharpened by recent US enforcement actions where prosecutors and regulators have charged crypto “market makers” over schemes such as wash trading and artificial volume generation. In late 2024, US authorities filed parallel criminal and civil cases against several crypto-focused firms presented as market makers, including Gotbit, ZM Quant, CLS Global, and MyTrade, along with associated individuals. According to the complaints, these firms allegedly offered “market‑manipulation‑as‑a‑service” to token issuers and promoters, using wash trades, self‑trading, and algorithmic bots to fabricate high trading volumes and support prices, sometimes generating quadrillions of transactions and billions of dollars of artificial volume per day. Regulators say these tactics misled retail investors by simulating healthy markets and contributed to pump‑and‑dump style schemes, leading to both fraud and market manipulation charges under US securities law. For market makers and token projects globally, Tavus’ warning underscores that strategies such as artificial volume, spoofing, layering, and undisclosed price support are increasingly likely to be scrutinised as manipulation, particularly when employed around illiquid or declining tokens. The evolving enforcement posture raises legal risk not only for the market‑making firms themselves but also for token teams that hire them and structure contracts around aggressive liquidity or price‑support objectives. Guidance from law firms now emphasises due diligence on market makers, clearly drafted agreements, explicit prohibition of manipulative practices, and robust reporting and audit rights as minimum safeguards. As regulators test novel cases and deploy tools such as undercover tokens and sting operations to identify abusive trading schemes, Tavus and others advise that crypto projects treat market‑making as a regulated activity with potential fraud and securities‑law exposure, rather than a purely technical liquidity service.
AI-generated background, compiled from web sources — not editorial content.
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