SEC and DOJ Charge Numerous Companies and Individuals with Manipulation in Crypto Markets

SEC Charges Three So-Called Market Makers and Nine Individuals in Crackdown on Manipulation of Crypto Assets Offered and Sold as Securities

The Securities and Exchange Commission today announced fraud charges against three companies purporting to be market makers and nine individuals for engaging in schemes to manipulate the markets for various crypto assets being offered and sold as securities to retail investors. As alleged, the schemes were intended to induce investor victims to purchase the crypto assets by creating the false appearance of an active trading market for them.

According to the SEC’s complaints, crypto asset promoters Russell Armand, Maxwell Hernandez, Manpreet Singh Kohli, Nam Tran, and Vy Pham (Promoters) hired so-called market makers ZM Quant and Gotbit to provide market-manipulation-as-a-service, which included generating artificial trading volume or manipulating the price of crypto assets that the Promoters offered and sold as securities to retail investors in unregistered transactions. The SEC also alleged that ZM Quant and a third so-called market maker, CLS Global, undertook similar schemes to manipulate the market of a crypto asset offered and sold as a security that was created at the direction of the Federal Bureau of Investigation as part of its parallel investigation into potential market manipulation in the crypto asset industry.

SEC Charges “Magic Mushroom” Company and Two Individuals with Multimillion Dollar Pump-and-Dump Scheme

The Securities and Exchange Commission today charged Minerco Inc. (former over-the-counter ticker: MINE), Bobby Shumake Japhia, and Julius Makiri Jenge, for their roles in an alleged pump-and-dump scheme that defrauded investors out of approximately $8 million while generating millions of dollars in ill-gotten proceeds from sales of Minerco stock.

According to the SEC’s complaint, in the fall of 2019, Shumake, who was formerly known as Robert Samuel Shumake, Jr., secretly gained control of a large stock position in Minerco, an inactive penny stock company, and then arranged for Jenge to assume control of Minerco. The defendants then began pumping Minerco’s stock price by promoting Minerco as the “first publicly traded company focused on the research, production, and distribution of psilocybin mushrooms.” Psilocybin is the principal psychoactive component in “magic mushrooms,” a plant-based hallucinogen.

SEC Chair Gary Gensler on Crypto: ‘It’s Unlikely This Stuff Is Gonna Be a Currency’

U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler said he thinks it’s unlikely that bitcoin (BTC) or other cryptocurrencies will ever be widely used as a form of payment and, instead, will continue to be seen as more of a store of value.

Speaking at an event at NYU School of Law in Manhattan on Wednesday, Gensler responded to a question from an attendee about what the value of cryptocurrency – which was created to be separate from any government – would be to its users if totally brought into the regulatory fold.

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“You want one currency unit because it’s a store of value, a medium of exchange, a unit of account. It all has tremendous economics of networks,” Gensler said. “So it’s unlikely this stuff is going to be a currency. It’s going to have to show its value through disclosure, through use. … The same way you pick amongst the thousands of securities that are listed on the stock exchange.”

FTX investors drop lawsuit against law firm Sullivan & Cromwell

A group of FTX investors told a Miami federal court Wednesday that they are voluntarily dismissing, opens new tab their proposed class action against prominent U.S. law firm Sullivan & Cromwell.

The investors had accused Sullivan & Cromwell of participating in the defunct cryptocurrency exchange’s multibillion-dollar fraud and then enriching itself as FTX’s lead bankruptcy counsel. The firm had represented FTX on about 20 matters before it collapsed.

But lead plaintiffs’ counsel Adam Moskowitz told Reuters on Wednesday that there was “no claim at this stage” against the New York-founded law firm.

Moskowitz cited the work done by FTX bankruptcy examiner Robert Cleary of Patterson Belknap Webb & Tyler, who found in reports issued in May and September, opens new tab that Sullivan & Cromwell was not complicit in the fraud that caused the crypto company’s collapse and had not ignored red flags during its representation of former FTX CEO and founder Sam Bankman-Fried.

The Downfall of FTX’s Ryan Salame and Crypto Advocate Michelle Bond

He was a wealthy cryptocurrency executive with a shiny white Porsche and a luxury condo in the Bahamas. She was a crypto policy expert with political ambitions, advocating for the industry in Washington.

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But this tale of crypto boy meets crypto girl has turned into a legal nightmare. Mr. Salame, 31, once a top lieutenant to Mr. Bankman-Fried, is set to report to federal prison in Maryland on Friday to start a sentence of seven and a half years, after he pleaded guilty to campaign finance fraud. In August, Ms. Bond, 45, who lives with Mr. Salame and their infant son in Potomac, Md., was also charged with campaign finance violations linked to FTX.

The two were married last month in a small ceremony in Nevada. But their $4 million house in Potomac, purchased in 2022 at the height of FTX’s success, is set to be sold, with all the proceeds surrendered….

New Texas exchange pledges tougher standards than New York rivals

The head of the fledgling Texas Stock Exchange has pledged tougher listing standards than his New York rivals as part of his state’s bold attempt to establish Dallas as a financial challenger to east coast dominance.

Jim Lee, chief executive of the TXSE, told the Financial Times the new exchange’s standards, including earnings tests, minimum prices and other unspecified measures, would be stringent enough to in effect exclude more than a third of the companies listed on Nasdaq and the New York Stock Exchange.

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“Nobody’s been able to start a new listings exchange in 50 years — and they’ve tried,” said James Angel, finance professor at Georgetown University. “The people behind this do know how to start a stock exchange so with good technology and marketing, they will make sure they have a good trading product. But listings are an uphill battle.”