Author: flowie, ChainCatcher
Editor: Nianqing, ChainCatcher
On October 9, U.S. federal prosecutors have charged four cryptocurrency "market makers" and their employees with market manipulation and fraud, with the SEC and FBI also involved in the investigation. Gotbit, the market maker behind the so-called "meme king DWF", Bonk, and Neiro, is on the list.
Currently, Gotbit's CEO Aleksei Andriunin has been arrested in Portugal, and two Gotbit employees in Russia have also been indicted.
A year ago, on-chain detective ZachXBT had already exposed Gotbit's market-making tactics and warned users to be wary of any projects cooperating with Gotbit. Subsequently, Gotbit was also embroiled in controversy for its suspected rug pulls in several tokens it provided market-making services for.
However, Gotbit's market-making services still attracted a large number of project parties and meme teams. According to Gotbit's official X platform, Gotbit has provided market-making services for about 50 projects this year, most of which are memes, including Neiro and Hamster Kombat.
Built on Faked Trades, Became Famous for Meme Market Making
According to the official introduction, Gotbit is a hedge fund that specializes in helping tokens achieve market capitalization growth, with two main business segments: market making and venture capital. Gotbit manages $1.3 billion in assets and has more than 400 institutional clients.
According to RootData data, Gotbit has also invested in the decentralized cross-chain IDO platform Poolz Finance (POOLX), Layer1 5ireChain (5IRE), and the Solana-based meme project analoS.
Gotbit was founded in 2018 during the ICO boom, when its founder Alexey Andryunin was still a 20-year-old college freshman.
In 2019, CoinDesk published an article exposing Gotbit's practice of faking trading volume, using bots to trade tokens back and forth to create the illusion of an active market, in order to help clients list on at least two obscure exchanges and achieve listing on CoinMarketCap.
Alexey mentioned that exchanges were aware of this manipulative behavior but had no interest in stopping it. At the time, there were 300 to 500 projects on CoinMarketCap that were Gotbit's clients. Alexey also openly admitted that he did not have high hopes for the long-term development of this business, as crypto regulation was bound to focus on the fake trading on these obscure exchanges.
However, Gotbit did not slow down its business. At the end of 2022, the first meme coin on the Solana chain, Bonk, was launched, and with the surge in Bonk's market capitalization, Gotbit, as the market maker behind it, also came to the forefront.
At the end of 2023, in the midst of the Solana meme craze, Gotbit's market-making for ANALOS created a 3,700-fold wealth myth in a week, making Gotbit the wealth code for meme players for a time.
In 2024, as the meme craze continued to heat up, Gotbit also seized the opportunity to shift its focus to providing market-making services for memes. BEER, WATER, and other popular memes all had Gotbit's involvement.
The earliest tweets on Gotbit's official X platform are dated March 14, and according to the statistics of the content it has published on its X platform since March 14, Gotbit has publicly collaborated with more than 50 projects, over 90% of which are meme projects, and most of them are memes on the Solana chain.
The pinned tweet on Gotbit's official X platform is about the recent listing of lowercase Neiro (First Neiro on Ethereum) on Binance, and it also reveals the cooperative relationship with the Neiro team.
It is worth mentioning that on July 19, Gotbit's official X platform also tweeted that it was providing market-making services for NextGemAI, a project created by the FBI's "sting operation".
Continuous market-making for memes has also made Gotbit infamous and facing fraud charges from the U.S. Attorney's Office.
Market-Making Fake Memes to Harvest Players, Gotbit Finally Caught by the FBI
An investigation document provided by an FBI agent mentioned two cases involving Gotbit, both of which involved inflating the trading volume of cryptocurrency companies and manipulating cryptocurrency trading prices to induce purchases and raise cryptocurrency prices, and then selling at high prices to profit.
Gotbit has repeatedly helped the cryptocurrency company Robo Inu increase its daily trading volume by more than $1 million. The Web3 technology company Saitama also obtained tens of millions of dollars in revenue through Gotbit's "market-making" services.
In September 2023, on-chain detective ZachXBT also shared a document on the X platform exposing Gotbit's market-making strategy.
- In the initial price discovery phase, Gotbit will push the token price up to 10 times to create FOMO, attract as much buying power as possible, and then sell all the tokens at the subsequent peak.
- Within the first 12 trading hours, Gotbit's goal is to focus on earning quick and substantial profits by exploiting existing arbitrage opportunities.
- On launch day, Gotbit's target trading volume is over $50 million, with most of the trading generated for free on CEXs through its system.
- Gotbit is committed to achieving a 20-fold increase in the first peak of the token after launch, and a 25-fold increase within the first month of trading.
ZachXBT had stated that Gotbit's market-making services had issues and warned users to be wary of projects cooperating with Gotbit.
However, Gotbit remained active and collaborated with multiple meme projects to harvest a large amount of user funds.
At the end of 2023, within 2 weeks of Gotbit's cooperation with ANALOS, the market capitalization reached a peak of $150 million and then plummeted to $19 million, and the token subsequently disappeared and could not be purchased. The top 10 holders of ANALOS made a combined profit of over $7 million.
In May this year, the beer-themed MEME token BEER raised nearly $5 million in its pre-sale, reaching 30,000 SOL. After launch, the BEER token price soared, reaching a peak of 30 times and a market capitalization of $500 million.
A month later, the price of BEER tokens dropped more than 90% from the high point, and the market capitalization also fell to around $50 million. LookonChain monitoring found that the addresses associated with the BEER team had made multiple sell-offs after the price surge, cumulatively selling over $3 million.
After BEER, Gotbit replicated the BEER playbook. The MEME coin WATER, in which Gotbit participated in market-making, raised over $41 million in the pre-sale stage, attracting over 26,000 wallet addresses to participate. After WATER was launched on Solana, the price spiked nearly 10 times, and the market capitalization once exceeded $1 billion, but then plummeted within a few hours.
Lookonchain exposed the team's rug pull behavior, with the development team transferring 844 million WATER tokens to 11 wallets that did not participate in the pre-sale, and then selling the tokens. One on-chain sniper lost over $710,000 in this opening.
In addition, HUND, SHARK, SI, SOMBRERO, MACHO, SIMBA, and other memes that Gotbit participated in market-making are also suspected of being rugs.
Are Memes and Crypto Market Makers the Focus of Regulatory Crackdown?
Looking at Gotbit's manipulative behavior, the popularity of memes has also made memes a hotbed of fraud.
Regarding the fraud charges against Gotbit, crypto KOL @WazzCrypt believes that "this is a bearish signal for memes. Gotbit, as one of the largest meme market makers, has supported meme conspiracies and scam coins. Promoting meme coins without committing crimes has become difficult."
However, in the view of CryptoQuant founder Ki Young Ju, this may be a positive signal, as "regulation will help eliminate its gambling stigma."
Currently, an undeniable trend is that crypto market makers may become a focus of crackdown by U.S. regulatory authorities.
After the SEC, FBI, and U.S. Department of Justice jointly charged Gotbit, ZM Quant, CLS Global, and MyTrade, four crypto market makers, the SEC has also charged Cumberland, a well-established market maker founded in 2014, accusing it of operating as an unregistered securities dealer.
Crypto market makers, as important participants in the liquidity of the crypto market, are too close to money and are also the main targets accused of manipulating and defrauding the market. Previously, the new type of market maker DWF that emerged in this cycle has also been investigated and exposed by media such as The Wall Street Journal for suspected rug pulling, false propaganda, and market manipulation.
With the successive involvement of US regulators, it is expected that more "conspiracies" of crypto market makers will surface.
