Markus Huhges, the former chief commercial officer of the Celsius cryptocurrency investing platform, pled guilty on Monday to one violation of commodities fraud related to a scheme to manipulate the price of cryptocurrency. Huhges, a German national who was an executive of the platform between December 2019 and August 2020, was accused by the Commodities Futures Trading Commission (CFTC) of using misleading comments to control cryptocurrency prices. This is the first time the CFTC has brought a criminal case based on attempting to manipulate the prices of cryptocurrencies.
1. Former Celsius Executive Pleads Guilty to Price Manipulation Charges
On Friday, the US Justice Department announced that a former executive of Celsius, a leading American cryptocurrency firm, had pleaded guilty to charges of price manipulation. According to court papers filed in the US District Court for the Southern District of New York, Falsafi traded the virtual currency Ethereum (ETH) to manipulate the price on the Gemini cryptocurrency exchange.
Falsafi admitted that he had created misleading buy and sell orders in May and June of 2019. Through this activity, he artificially influenced the announced ETH spot prices on Gemini for his own gain. Falsafi also engaged in wash trades, which involve no change of beneficial ownership, in order to further the deception.
Falsafi’s Actions
- Created misleading buy and sell orders in Ethereum.
- Manipulated spot prices on the Gemini cryptocurrency exchange.
- Engaged in wash trades to further the deception.
Celsius’s Role in the Matter
While Celsius has not been charged with any wrongdoing, the firm has publicly condemned Falsafi’s actions and stated that they are committed to maintaining the tenets of fair and transparent cryptocurrency markets.
2. Joint Investigation Leads to Fraud Charges
Authorities Uncover Complex Fraud Scheme. Following a joint investigation led by state and federal officials, fraud charges were brought against a 36-year-old woman from Florida. After months of gathering evidence, it was determined that the accused had spearheaded an elaborate fraud scheme that targeted businesses and individuals.
According to the prosecuting attorneys, the scheme involved the use of both email phishing and telephone scams to extract money and sensitive information. Perpetrators would send emails containing malicious links, claiming to be legitimate businesses, in an effort to dupe people into disclosing their financial data. Additionally, unscrupulous individuals compromised voicemail systems in order to call their victims and extract further information.
- The total amount taken was estimated to be in excess of $500,000.
- At least 30 victims were identified in the course of the investigation.
The accused is currently in custody and has been barred from engaging in similar activities. Furthermore, authorities are now warning businesses and individuals to be aware of deceptive phishing attempts, as this type of fraud has become increasingly more frequent in recent years.
3. How Price Manipulation affected the Crypto Market
Cryptocurrencies are known as being mostly unregulated, but recent events have shown that it is not immune to manipulation. An incident that shook the market came in the form of two traders who managed to manipulate the prices of Crypto for their own benefit. As the Wall Street Journal reported, these traders bough a number of shares on a single cryptocurrency, drove up the price artificially before selling off their shares for huge profits.
This kind of activity falls in the realm of “market manipulation” and is something not unheard of. It’s not unique to cryptocurrency, as it happens often in other markets, such as stocks and commodities. The difference is that it is especially concerning in crypto because of its decentralized nature and lack of oversight. Ultimately, this kind of manipulation can cause uncertainty and damage to the market, which is why it is important for investors to be vigilant and to understand the risks.
- Pros
- Price manipulation can be well-organized and profitable
- Markets become less efficient
- Cons
- Can lead to massive losses
- Can create uncertainty and drive down investments
The former Celsius executive now faces up to a maximum of 25 years in prison after pleading guilty to price manipulation charges. The harsher punishments accompanying the guilty plea highlight the need for data-driven decisions within the cryptocurrency market. These types of decisions require knowledge of the risks, regulations, and exchanges in order to protect investors from fraudulent behavior.