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The meme coin industry is undoubtedly one of the fastest-growing sub-sectors in crypto. As of October 10, CoinMarketCap data shows that the total market cap of all meme coins exceeds $47 billion. Dogecoin, Shiba Inu, and Pepe top the list, commanding billions and, in some instances, hundreds of millions.
United States DoJ Cracks Down On Meme Coin Wash Traders And GoBit
Bullish as the industry might be, it is rife with pump-and-dump schemes and even rug pulls. Traders have lost millions through rug pulls. There are hundreds of millions more lost through pump-and-dump schemes.
On October 9, the United States Department of Justice (DoJ) announced the arrest and prosecution of four crypto firms and 14 individuals. Detectives also recovered over $25 million of diverse crypto assets.
Among those nabbed included Aleksei Andriunin of GoBit, a meme coin market maker and hedge funds. As part of their services, they created liquidity for the tens of thousands of meme coins launching on multiple networks, including Solana.
The DoJ alleges that GoBit and everyone arrested were engaged in wash trading and knowingly manipulating meme coin prices.
Wash trading is illegal in the United States and jurisdiction across the world. This manipulative tactic involves creating an illusion that there is activity. Since meme coins are driven by hype, users are baited by this false front, losing millions as a result.
Charges Forwarded Bullish For Meme Coins
Although some might see the arrest of GoBit executives as a blow to the industry, Santiment analysts think the crackdown could boost trader confidence. Most importantly, wash trading and the manipulation of meme coin prices, will encourage the development of a healthy trading environment.
Santiment added that removing what the United States DoJ perceives as a key meme coin market manipulator sends a clear message to all other players that these nefarious practices are no longer condoned.
Subsequently, this could help restore market confidence and attract new investors who were initially hesitant due to widespread fraud concerns.
For now, confidence might be down. However, in the long term, with authorities cracking down on manipulators, the market will be more resilient to such scandals. If GoBit recovers from this blow, it will be more transparent in its activities, leveling the playing field for traders.
Feature image from Canva, chart from TradingView
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