Original author: flowie, ChainCatcher
Original editor: Nian Qing, ChainCatcher
On October 9, U.S. federal prosecutors filed charges of market manipulation and fraud against four cryptocurrency “market makers” and their employees, with the SEC and FBI also involved in the investigation. Gotbit, the market maker behind the so-called “meme DWF”, Bonk, and Neiro, is among them.
Currently, Gotbits CEO Aleksei Andriunin has been arrested in Portugal, and two Gotbit employees in Russia have also been indicted.
As early as a year ago, the on-chain detective ZachXBT had exposed Gotbit’s market-making practices and warned users to be wary of any project that cooperated with Gotbit. Since then, Gotbit has also been controversial because of the suspected ruggedness of multiple tokens involved in market making.
However, Gotbit’s market-making service still attracted a large number of project parties and meme teams. According to Gotbit’s official X platform, Gotbit provided market-making services to about 50 project parties such as Neiro and Hamster Kombat this year, most of which were memes.
Started as a fake trader and became famous for meme market making
According to the official introduction, Gotbit is a hedge fund that specializes in helping tokens achieve market value growth. It mainly has two business segments: market making and venture capital. Gotbit manages $1.3 billion in assets and has more than 400 cooperative institutional clients.
According to RootData data, Gotbit has also invested in the decentralized cross-chain IDO platform Poolz Finance (POOLX), Layer 1 5 ireChain (5 IRE), and the Meme project analoS on Solana.
Gotbit was founded in 2018 when ICO was popular. At that time, its founder Alexey Andryunin was a 20-year-old college student who had just enrolled.
In 2019, CoinDesk exposed Gotbits fake trading behavior in an article , which was to create the illusion of an active market by programming robots to trade tokens back and forth to help customers list on at least two unknown exchanges and achieve the goal of listing on CoinMarketCap.
Alexey mentioned that the exchange was aware of this manipulation, but had no interest in stopping it. At that time, there were 300 to 500 projects on CoinMarketCap that were Gotbit’s clients. Alexey also said frankly that he did not have long-term hopes for the development of this business, because crypto regulators would inevitably pay attention to the fake transactions of these unknown exchanges.
But Gotbit did not slow down its business. At the end of 2022, the first meme coin Bonk on the Solana chain was launched. As the market value of Bonk soared, Gotbit also surfaced as the market maker behind it.
At the end of 2023, during the Solana reversal meme craze, Gotbits market-making ANALOS created a wealth myth of 3,700 times in a week, and also made Gotbit the wealth code of meme players for a time.
As memes continue to be popular in 2024, Gotbit will also shift its focus to providing market making services for memes. Gotbit is behind many popular memes such as BEER and WATER.
The earliest tweet from Gotbit’s official X platform was on March 14. According to statistics on cooperation content released by its X platform since March 14, Gotbit has publicly cooperated with more than 50 projects, more than 90% of which are meme projects, and most of them are memes on the Solana chain.
The top tweet of Gotbit’s official X platform is about the recent listing of Binance’s lowercase Neiro (First Neiro on Ethereum), and revealed the cooperative relationship with the Neiro team.
It is worth mentioning that on July 19, Gotbit’s official X platform also tweeted that it would provide market making services for NextGemAI, a project created by the FBI for this “fishing enforcement” operation.
Gotbit’s continued market making for memes has made it notorious and has faced charges of fraud from US prosecutors.
Market making fake meme harvests players, Gotbit is finally targeted by the FBI
An investigation document provided by an FBI agent mentioned two cases in which Gotbit was involved, both of which made profits by exaggerating the trading volume of crypto companies, manipulating crypto trading prices to induce purchases to raise crypto prices, and then selling at high prices.
Gotbit has helped the cryptocurrency company Robo Inu increase its daily trading volume by more than one million US dollars on several occasions. Web3 technology company Saitama has also earned tens of millions of dollars through Gotbit’s “market making” service.
In September 2023, on-chain detective ZachXBT also shared a document on the X platform that revealed Gotbit’s market-making strategy.
Gotbit will push the token price up to 10x in the first few minutes of the price discovery phase to create FOMO, attract as much buying power as possible, and then sell all the tokens in the subsequent peak.
During the first 12 trading hours, Gotbit aims to take advantage of existing arbitrage opportunities and will focus on making quick and substantial profits;
On the launch day, Gotbits target trading volume is more than 50 million US dollars, and most of the transactions are generated on CEX for free through the generation system.
Gotbit aims to achieve a 20x return on the token at its first peak after opening, and a 25x return within the first month of trading.
ZachXBT once stated that there were problems with the market-making service provided by Gotbit, and reminded users to be wary of projects cooperating with Gotbit.
But Gotbit remains active, cooperating with multiple meme projects to harvest large amounts of funds from a large number of users.
At the end of 2023, within 2 weeks of ANALOSs cooperation with Gotbit, the market value peaked at $150 million and then plummeted to $19 million. The token then disappeared and could not be purchased. The top 10 holders who purchased ANALOS made a total profit of more than $7 million.
In May this year, the beer-themed MEME token BEER pre-sold 30,000 SOL, worth nearly $5 million. After the launch, the price of BEER tokens soared, with the highest increase reaching 30 times, and the market value reached $500 million.
One month later, the price of BEER tokens fell by more than 90% from its high point, and the market value also fell back to around $50 million. According to LookonChain monitoring, the BEER teams associated address had shipped tokens several times after the price rose, with a total sales of more than $3 million.
After BEER, Gotbit replicated the BEER routine. MEME coin WATER, which participated in market making, raised more than 41 million US dollars in the pre-sale stage, attracting more than 26,000 wallet addresses to participate in this pre-sale. After Solana went online, the WATER token rose nearly 10 times in a short period of time, and its market value once exceeded 1 billion US dollars, but then fell all the way within a few hours.
Lookonchain revealed the insider trading behavior of its development team, who transferred 844 million WATER tokens to 11 wallets that did not participate in the pre-sale and then sold the tokens. An on-chain sniper lost more than $710,000 in this opening.
In addition, HUND, SHARK, SI, SOMBRERO, MACHO, SIMBA, etc., which Gotbit participates in market making, are also suspected to be rugs.
Meme and crypto market makers become the focus of regulatory crackdowns?
Judging from Gotbit’s manipulative behavior, the popularity of memes has also made memes a hotbed of fraud.
Regarding Gotbit being sued for fraud, crypto KOL @WazzCrypt believes that “this is bad news for memes. As one of the largest meme market makers, Gotbit supports conspiracy memes and scam coins. It becomes difficult to promote meme coins without committing a crime.”
But CryptoQuant founder Ki Young Ju believes this could be a positive sign, saying that “regulation will help remove the gambling stigma.”
A trend that cannot be ignored at present is that crypto market makers may become the focus of crackdowns by US regulators.
Following the joint accusations by the SEC, FBI, and the U.S. Department of Justice against four crypto market makers, Gotbit, ZM Quant, CLS Global, and MyTrade, the SEC has accused Cumberland, a long-established market maker founded in 2014, of operating as an unregistered securities dealer.
As an important participant in the liquidity of the crypto market, crypto market makers are too close to money and are also the focus of accusations of market manipulation and fraud. Previously, DWF, a new market maker that emerged in this cycle, was repeatedly investigated by the Wall Street Journal and other media for suspected wash trading, false propaganda, and market manipulation.
As U.S. regulators step down one after another, more crypto market-making “conspiracy” groups are expected to surface.
