It's not so long ago that celebrities who wanted to make
money in crypto did so by simply endorsing other people's tokens,
NFTS, or even Ponzi schemes or crypto exchanges as they used to
be called. People like Matt Damon, Tom
Brady, Larry David, and that little fella from the Lord of
the Rings movies fronted huge advertising campaigns for crypto
exchanges. I was disappointed to learn
earlier this year from court documents that Snoop Dogg was
paid around $1 million to perform as a board ape at the
MTV Video Music Awards in 2022. I suppose it makes sense that
they paid him to do this, as a quick look at YouTube shows that
the official music video of his board ape song only got 3600
views over the last two years, and at least 3500 of those views
were me. It's basically been on repeat
play here the whole time. Well, that and the vacuum
cleaner song by Razzle Khan. Everything changed in 2024 when
celebrities like Caitlyn Jenner and Iggy Azalea launched their
own meme coins. Yesterday I learned that
launching your own meme coin had become so mainstream that the
FBI even launched their own token called Next Fund AI,
which, let's be serious, is a terrible name for a crypto
token. What's wrong with Fed token or
FBI ENU? Maybe those ones were already
taken. According to the SEC, Next Fund
AI traded for only 9 hours, which doesn't sound long, but it
does beat Rishi Sunak's NFT for Britain, which no one seems to
talk about anymore. So there's that at least.
Go USA. The FBI created this token which
operated on the Ethereum blockchain along with a fake
company in order to ensnare crooks, which seems a bit mean
spirited of them. They apparently met up with
crypto market makers to discuss employing their services.
One of the defendants allegedly described himself to the FBI
agents as the mastermind, explaining that his company used
bots to buy and sell at the same time on centralized exchanges to
generate trading volumes. This is known as wash trading
and is illegal in securities markets, according to the press
releases. As late as last week, this
market makers bots were still making millions of dollars worth
of wash trades in crypto markets before being deactivated at the
request of law enforcement. According to a Department of
Justice press release, 80, 18 individuals and entities have
now been charged for widespread fraud and manipulation in the
cryptocurrency markets. I mean, who knew that this sort
of thing was going on? And gentlemen, you can't fight
in here. This is the war room.
Charges were unsealed this Wednesday against the leaders of
four cryptocurrency companies, 4 cryptocurrency financial
services firms known as market makers, and employees at those
firms. Apparently, 4 defendants have
pleaded guilty, another has agreed to plead guilty, and
authorities apprehended three other defendants in Texas, the
United Kingdom, and Portugal this week.
More than $25 million in cryptocurrency has been seized
and multiple trading bots responsible for millions of
dollars worth of wash trades for approximately 60 different
cryptocurrencies have been deactivated. 3 market makers, ZM
Quant, CLS Global and Mytrade, along with their employees are
charged with allegedly wash trading and or conspiring to
wash trade on behalf of the FBI cryptocurrency company and token
created as part of the investigation.
A fourth market maker got bid. Its CEO and two of its directors
are also charged for perpetrating a similar scheme.
Zeke Fox at Bloomberg explained in an article earlier this week
that the investigation started with an SEC tip about a crypto
company called Setama, which we'll come back to shortly.
Investigating Setama LED authorities to cooperating
witnesses who helped them set up the FBI crypto token Next Fund
AI, and in video calls and Telegram chats, market makers
offered to manipulate the price of this token for the FBI, which
it turns out was a bit of a mistake.
If they would only have implemented some sort of know
your customer type rules, maybe they wouldn't have all of these
problems right now, there are a number of court cases to look at
here, but according to the documents, the defendants are
accused of making false statements about their tokens
and executing wash trades in those tokens to create the
appearance of trading activity that would make the tokens look
like good investments. Now of course that's playing
fast and loose with the meaning of the term investment, but
we'll keep going. There are dog teamed
cryptocurrencies coming up and for some reason that's always
where these stories end up. According to the court
documents, the deceptive tactics employed attracted new investors
and purchasers and resulted in an increase in the tokens
trading prices. The defendants are alleged to
have sold their tokens at the pumped up prices and the largest
of these tokens, Satama, at one point had a multi billion dollar
market value value. I did a quick check and it might
surprise you to learn that the price of that token was up 17
1/2 percent yesterday, a full day after the announcement of
these charges. With a market cap of just over
$11 million, these guys don't seem awfully smart to me.
The same people appear to have another coin called SATA Chain
Coin, and it's not a star performer either.
It seems to be down 98.77% since it was first launched, which
means that if you buy it now, it can only fall by an additional
100%, which is the worst case scenario.
There is, of course, a website and a Twitter account.
We we should probably check those out right on Twitter, they
have a pin tweet that says something, something innovation
and then a little spaceman animation with logos on all of
the planets. And this is all important stuff.
You're not going to hit a multi billion dollar market cap
without a decent space themed animation.
If we Scroll down, it says that business operations will
continue as usual, which is great stuff.
It then says that we're aware of the allegations.
Thank you for your patience. That's never really a good sign
is it? I guess it's better than when
that little fella from the Lord of the Rings started tweeting
out those single letter tweets every few hours till it spelled
out what happened and that wasn't really confidence
inspiring at all. These guys are getting much
better now, it says here. We have been advised that no
additional information regarding the allegations against Manny
the Hit Man will be available until next week.
And that seems a bit worrying. Let's see who Manny the Hit Man
is. He sounds intimidating.
Oh look, it's a nerd. A nerd in a corporate logo
T-shirt. The worst kind.
It's really only a nerd who's going to give himself a nickname
like Manny the Hitman. He'll come up with that one
himself. It's a bit like that guy who
pretends that other people call him Mr. Wonderful.
No one calls him that. This kind of reminds me of that
episode of Seinfeld where George Costanza wanted to be given the
nickname T-bone, but instead got nicknamed Coco the Monkey.
It's lucky that nothing like that happened to a money that
can't money the hitman. Anyhow, let's check out their
website. It says here that we can talk to
an expert that might be helpful. Oh, it says error for site
owner, invalid domain for site key.
I feel they misled us a bit on Twitter when they said that
business operations would continue as usual.
I don't know what to tell you here.
I wonder if they blew the whole corporate budget on that little
Spaceman animation for Twitter. This isn't exactly confidence
inspiring. So let's go back to the legal
complaints. So the cryptocurrency companies
are accused of hiring financial services firms, another term
that's being used quite loosely here, that they call market
makers to wash trade their tokens in exchange for payment.
Now one of the defendants who's pleading guilty described their
market making to a prospective client by explaining that the
objective on the secondary markets is to find other buyers
from the community, people you don't know about or don't care
about, which is a interesting definition of community because
he says we have to make these other buyers lose money in order
for us to make profit. So that's a thing.
It can't all be scamming and manipulation though, can it?
Yeah, it can. Another crypto market maker is
alleged to have told potential clients that if you guys have
requirements on the price, for example, like pump the price
from $1.00 to $2.00, we'll give you a plan.
And that seems helpful, I suppose, but also really quite
illegal. OK, So what does a market maker
do in traditional finance? Is it the same sort of thing?
Well, no, it's not. Different exchanges are
organized differently. The New York Stock Exchange has
individual security specialists who work on the trading floor
and specialize in facilitating trades in the specific stocks
that they cover. Electronic markets like NASDAQ,
where there's no physical trading floor, rely on a system
where there are multiple market makers who keep an inventory of
the stocks that they make markets in, and they stand ready
to either buy or sell securities for Oregon from their own
accounts to their customers. The average number of market
makers for a stock on the NASDAQ is 14, and market makers are
required to give A2 sided quote, meaning that they must state a
firm bid and ask price that they're willing to honour.
Once an order is received from a buyer, the market maker fills
them with shares from their own inventory to complete the order.
What they don't do, which they do seem to do in crypto, is have
lots of bought accounts that buy and sell stock in wash trades,
slowly manipulating the price so that it can be dumped on a
retail investor on a Stock Exchange.
Market makers make their money by capturing the bid ask spread
when investors trade with them and they compete with each other
by giving good prices to investors so that they can get
fills and capture that spread. In crypto, according to the
Seca, token issuer pays the market makers to provide on
demand market manipulation and I should note that the SEC press
release refers to them as so-called market makers, which I
guess is different to a market maker, the US Attorney's Office
wrote in their press release. The message today is if you make
false statements to trick investors, that's fraud.
They go on to say that the four crypto market makers and their
employees are accused of spearheading a sophisticated
trading scheme that built honest investors out of millions of
dollars. Once again, I worry that we
shouldn't be calling the people who put their savings into
something called Next Fund AI investors.
There's an argument that the kind of person who thinks that
this is a good investment was going to lose their money
anyhow. And in a way, these so-called
market makers just provided liquidity to allow them to lose
their money a little bit faster, which possibly leads to a more
efficient market. The SEC explains that the FBI
retained a so-called market maker called ZM Quant to support
trading in Next Fund AI, which was sold as a way to so-called
invest in early stage so-called artificial intelligence
projects. Now look, many people would say
that the best way to invest in early stage AI projects is to
find some early stage AI projects and invest in them, not
by a crypto token that the owners of these early stage AI
projects will not have heard of. It seems like a convoluted
approach, but then again the comments in my videos are often
filled with people saying that I just don't get crypto.
Employees of ZM Quant are accused of counselling the
backers of Next Fund AI on how to artificially drive up the
price of the token before cashing out at the peaks.
According to the SEC complaint, ZM Quant's trades amounted to
more than 80% of Next Fund AIS trading volumes.
And I guess the other 20% were so-called investors.
All right, maybe I've been hard on the so-called investors.
Who am I to criticize someone who committed their savings to
early stage AI companies in a contrived manner so that they
could build an AI so powerful that we have to flee to Mars to
escape it's wrath? What else were so-called
investors being scammed with? Ah yes, Robo Enu.
Sorry, I feel dumb even knowing that this exists but yeah
so-called investors in so-called robo Enu got so-called ripped
off allegedly. Do you need me to even tell you
what Robo Enu is or can you already guess?
OK, they have a website, and I'm starting to notice that all of
these websites look exactly the same, it says.
Inspired by NASA's ambitious plan to launch robo dogs to
Mars, Robo Inu Finance aims to build an efficient, circular
ecosystem that brings together the best fintech resources.
Join us and be a part of something revolutionary.
And I can't help but think that if they said join us and be part
of something stupid they might have done a little bit better.
There's nothing about their so-called mission statement that
makes any sense or would involve anything revolutionary.
Just be straight up about it being another uninspired dog
teamed cryptocurrency. Tell the so-called investors how
stupid you think they are and maybe they'll just give you
their money. Anyhow, I really should be
working in crypto marketing, but that's not what I do.
According to the complaint, Robo Enu was promoted by a woman
named Vai Pham who also helped launch Setama.
So maybe she's friends with Manny the Hitman.
I imagine at crypto conferences she probably told people that
she was mentored by Manny the Hitman to impress them.
But anyhow, Pham it seems contacted a so-called market
maker called Gotbid as despite having spent 250,000 and actual
dollars on marketing, the response from so-called
investors had not been satisfactory.
So she and her team, I mean do these people have teams?
OK. She and her team said that they
were thinking about increasing the volume via so-called market
maker. She explained in a group chat,
which the FBI have access to, that the purpose of hiring a
socalled market maker was to increase and maintain trading
volume to attract so-called investors to her stupid token.
The complaint says that got bit personnel confirmed that they
understood that this was the purpose and they communicated
with FAM and her band of merry men about ways to create
so-called investor FOMO through artificial trading volume.
A fellow in the Telegram chat called Vatislaw Trader stated he
was trying to trigger organics, which the SEC helpfully explains
means individuals or entities other than Gotbid to buy her God
forsaken robot dog themed cryptocurrency.
So bag holders basically are members of the community who can
be counted on to hold bags. Fam and her team allegedly paid
Gotbid 3 to $6000 per month to allegedly manipulate the trading
volume of Robo Enu through automated wash trading on
Bitmart and Uniswap. The guy named Fedor Kedrov from
Gottbed allegedly told Pham and her team that he could achieve
any volume you want and recommended that Robo Enu start
with $200,000 in artificial daily volume.
A month or so later, Vadislav Trader posted that organic
volume accounted for less than 10% of Robo Enu's total trading
volume. The rest was Gottbed trading
with itself through automated wash trade.
Waiting. I found an interview with Vifam
on YouTube where she seems to be suggesting that small businesses
could pay staff salaries in Robo Enu.
Or small businesses who are able to you know to pay the salary in
in robo enu financial gain or even accept abif as a form of
payment. Now I can't help but feel that
that might be a deal breaker for most employees, but who knows?
And maybe the rest of us are fools for accepting money that
we can spend a salary. Maybe in a few years time Robo
enu will be the new reserve currency.
In the comments section here will be filled with people
saying this aged like milk. Anything could happen.
Wait a minute, is this? Is this what FOMO feels like?
I don't know now the US Attorneys Office posted a link
in their press release to a form for so-called investors in these
so-called crypto currencies to fill out.
So I'll leave a link to that in the description.
If you lost so-called money trading, these so-called tokens,
you can fill out that form now. Just so crypto investors don't
get angry at me in the comments section, I'll say that not all
crypto is fraud. Even in these terrible examples,
we can still see that up to 10% of it is also bag holders or
organics. Thanks for tuning into this
week's so-called podcast. I recently changed podcast host
to Spotify. I told them that I wanted the
same deal as Joe Rogan is getting and they agreed, but
they said that because my podcast gets fewer listens,
they'd pay me $100 million less than him, which seems fair.
There are a few new features though, such as the ability to
leave a comment, and this is the first episode where you can even
watch a video version of it on Spotify.
If you want to so do leave a comment to say hi and I'll talk
to you next week. Bye.