"Meme industry DWF" is accused of fraud. Besides Neiro and Bonk, which other projects does Gotbit provide market making for?

Author: flowie, ChainCatcher
Editor: Nianqing, ChainCatcher

On October 9, U.S. federal prosecutors filed market manipulation and fraud charges against four cryptocurrency "market makers" and their employees, with the SEC and FBI also involved in the investigation. Among those named is Gotbit, the market maker behind the so-called "meme DWF," Bonk, and Neiro.

Currently, Gotbit's CEO Aleksei Andriunin has been arrested in Portugal, and two of Gotbit's employees in Russia have also been charged.

As early as a year ago, on-chain detective ZachXBT exposed Gotbit's market-making tactics and warned users to be cautious of any projects collaborating with Gotbit. Since then, Gotbit has been embroiled in controversy for its involvement in several tokens suspected of being rugs.

However, Gotbit's market-making services continue to attract a large number of project teams and meme groups. According to Gotbit's official X platform, Gotbit has provided market-making services for around 50 projects this year, most of which are memes.

Starting with Fake Trades, Rising to Fame in Meme Market Making

From the official introduction, Gotbit is a hedge fund specializing in helping tokens achieve market cap growth, primarily focusing on market making and venture capital. Gotbit manages $1.3 billion in assets and has over 400 institutional clients.

According to RootData, Gotbit has also invested in decentralized cross-chain IDO platform Poolz Finance (POOLX), Layer1 5ireChain (5IRE), and the meme project analoS on Solana.

Gotbit was established during the ICO boom in 2018, when its founder Alexey Andryunin was a 20-year-old college student just starting out.

In 2019, CoinDesk revealed Gotbit's fake trading practices in an article, stating that they programmed bots to trade tokens back and forth, creating a false impression of an active market to help clients list on at least two unknown exchanges and achieve listing on CoinMarketCap.

Alexey mentioned that exchanges were aware of this manipulation but had no interest in stopping it. At that time, 300 to 500 projects on CoinMarketCap were clients of Gotbit. Alexey also candidly expressed that he did not have long-term hopes for this business, as crypto regulation would inevitably focus on the false trading of these unknown exchanges.

However, Gotbit did not slow down its business. At the end of 2022, the first meme coin on the Solana chain, Bonk, launched, and as Bonk's market cap surged, Gotbit, as the market maker behind it, came into the spotlight.

By the end of 2023, amidst a resurgence of meme trends on Solana, Gotbit's market-making for ANALOS created a wealth myth with a 3700-fold increase in just one week, making Gotbit a wealth code for meme players.

As the meme trend continued to heat up in 2024, Gotbit shifted its focus to providing market-making services for memes. Popular memes like BEER and WATER have Gotbit behind them.

The earliest tweets on Gotbit's official X platform date back to March 14. Since March 14, according to the statistics of cooperative content released on its X platform, Gotbit has publicly collaborated with over 50 projects, with more than 90% being meme projects, most of which are on the Solana chain.

Currently, the pinned tweet on Gotbit's official X platform is about the recently launched lowercase Neiro (First Neiro on Ethereum), revealing its partnership with the Neiro team.

It is worth mentioning that on July 19, Gotbit's official X platform tweeted announcing its market-making services for the project NextGemAI created by the FBI during this "sting operation."

Continuing to provide market-making for memes has made Gotbit notorious and has led to fraud charges from U.S. prosecutors.

Harvesting Players with False Meme Market Making, Gotbit Finally Under FBI's Radar

An investigation document provided by an FBI agent mentions two cases involving Gotbit, both of which exaggerated the trading volume of crypto companies and manipulated crypto trading prices to induce purchases, thereby inflating crypto prices and profiting by selling at high prices.

Gotbit has repeatedly helped the cryptocurrency company Robo Inu increase its daily trading volume by over a million dollars. The Web3 technology company Saitama also gained tens of millions of dollars through Gotbit's "market-making" services.

In September 2023, on-chain detective ZachXBT shared a document on the X platform revealing Gotbit's market-making strategies.

• Gotbit pushes the token price up to 10 times in the initial minutes of the price discovery phase to create FOMO, attracting as much buying power as possible, and sells all tokens at the subsequent peak.
• In the first 12 trading hours, Gotbit aims to exploit existing arbitrage opportunities, focusing on earning quick and substantial profits.
• On launch day, Gotbit's target trading volume is over $50 million, with most trades generated for free on CEX through a generating system.
• Gotbit aims to achieve a 20-fold increase in the token's first peak after opening and reach 25 times within the first month of trading.

ZachXBT has stated that there are issues with the market-making services provided by Gotbit, warning users to be cautious of projects collaborating with Gotbit.

Nevertheless, Gotbit remains active, collaborating with multiple meme projects to harvest large amounts of user funds.

By the end of 2023, within two weeks of collaborating with Gotbit, ANALOS's market cap peaked at $150 million before plummeting to $19 million, and the token subsequently disappeared, becoming unpurchaseable. The top 10 holders of ANALOS collectively made over $7 million in profits.

In May of this year, the beer-themed MEME token BEER raised 30,000 SOL in its presale, valued at nearly $5 million. After its launch, the BEER token price skyrocketed, reaching a maximum increase of 30 times, with a peak market cap of $500 million.

A month later, the price of BEER tokens dropped over 90% from its peak, with the market cap falling back to around $50 million. According to LookonChain's monitoring, associated addresses of the BEER team sold over $3 million worth of tokens after the price surge.

After BEER, Gotbit replicated the BEER strategy. The MEME coin WATER, which participated in market making, raised over $41 million during its presale, attracting over 26,000 wallet addresses to participate. After launching on Solana, the WATER token briefly surged nearly 10 times, with its market cap once exceeding $1 billion, but then plummeted within hours.

Lookonchain exposed the team's insider trading behavior, as they transferred 844 million WATER tokens to 11 wallets that did not participate in the presale, later dumping the tokens. An on-chain sniper lost over $710,000 during this launch.

Additionally, Gotbit's involvement in market making for HUND, SHARK, SI, SOMBRERO, MACHO, SIMBA, and others also appears to be rugs.

Are Meme and Crypto Market Makers the Focus of Regulatory Crackdowns?

From Gotbit's manipulative behavior, the popularity of memes has also made them a hotbed for fraud.

Regarding the fraud charges against Gotbit, crypto KOL @WazzCrypt believes, "This is a bearish signal for memes. As one of the largest meme market makers, Gotbit has supported conspiracy memes and scam coins. Promoting meme coins without committing a crime has become difficult."

However, in the view of CryptoQuant founder Ki Young Ju, this could be a positive signal, "Regulation will help eliminate its gambling stigma."

Currently, an undeniable trend is that crypto market makers may have become a key target for U.S. regulatory agencies.

Following the joint charges by the SEC, FBI, and U.S. Department of Justice against Gotbit, ZM Quant, CLS Global, and MyTrade, the SEC has also charged a long-established market maker, Cumberland, founded in 2014, claiming it operated as an unregistered securities dealer.

As important participants in the liquidity of the crypto market, crypto market makers are closely tied to money and are key targets for accusations of manipulation and market fraud. Previously, the newly emerged market maker DWF in this cycle has also been investigated and exposed by media such as The Wall Street Journal for suspected wash trading, false advertising, and market manipulation.

With the continuous actions of U.S. regulatory agencies, more "conspiracy" groups in crypto market making are expected to come to light.