Days after the U.S. government announced unprecedented criminal and civil charges against four crypto companies for alleged market manipulation and “wash trading,” meme coin projects dependent on those same firms have begun attempting to distance themselves from the fallout.
In particular, token teams that partnered with one of the implicated companies, the market maker Gotbit, have started issuing statements vigorously disavowing the firm they depended on for liquidity.
“We have halted our relationship with Gotbit, who were our market maker partners,” the Ethereum meme coin project Neiro posted on Twitter Friday. “None of the issues involving Gotbit or its employees involve or are relevant to Neiro in any capacity.”
Important announcement
We have halted our relationship with Gotbit, who were our market maker partners. None of the issues involving Gotbit or its employees involve or are relevant to Neiro in any capacity. However it is the right decision for the Neiro project and community to…
— Neiro (@neiro) October 11, 2024
Members of the crypto community were not so quick to accept Neiro’s assurances. The pseudonymous on-chain sleuth ZachXBT, for example, soon after excoriated Neiro for partnering with Gotbit prior to this week’s charges, despite the fact that concerns about the market maker have been public knowledge for over a year.
Perhaps your team should explain to the community why you chose Gotbit in the first place when they have always had a bad reputation with lots of evidence showing pump and dumps prior to them being charged for fraud and market manipulation by the US government this week. https://t.co/hxS5mxWMlH
— ZachXBT (@zachxbt) October 11, 2024
Other meme coin projects jumped on Friday to make clear they didn’t want to associate with Gotbit any longer—despite the fact that the self-described hedge fund and meme coin market maker still exercised substantial control over their tokens.
“Unfortunately, Gotbit still holds a large portion of our supply, including marketing, treasury, and team tokens, and they are currently unwilling to return them,” the team behind the Tron meme coin BMS conceded, in a post intended to announce a severing of ties with the company.
We regret to announce that $BMS is officially cutting ties with @gotbit_io, our former market maker, following their ongoing investigation by the SEC.
We had high hopes for this partnership, but BMS cannot be involved with any entity or company under the scrutinisation of the…
— BUY MY SHIT COIN 😂😂 (@BMScoin) October 11, 2024
Even meme coins that claim to have stopped working with Gotbit prior to this week made a point of emphasizing their condemnation of the company’s alleged conduct.
We are aware that Gotbit team is being accused of wash trading and market manipulation.$BEER team has stopped working with Gotbit as a Market Making partner long-time ago and switched to another provider.
Thanks for staying with us 💛 pic.twitter.com/lH4SQDQ9Vz
— beercoin (@beercoinmeme) October 11, 2024
The U.S. Department of Justice (DOJ) has accused Gotbit of making illegal wash trades with digital tokens to artificially inflate the tokens’ prices, before selling off the tokens in alleged “pump and dump” schemes. The U.S. Securities and Exchange Commission (SEC) further accused Gotbit of providing “on-demand market manipulation” by “generating fake, daily trading volume often in the millions of dollars by essentially trading crypto assets with itself.”
Those allegations probably surprised very few. Back in 2019, Gotbit co-founder Alexey Andryunin openly told CoinDesk in detail about his company’s business model: manipulating crypto markets for a fee, to increase the perceived legitimacy of obscure tokens.
“The business is not entirely ethical,” Andryunin said at the time.
Edited by Andrew Hayward