ZM Quant Investment Ltd., Baijun Ou a/k/a Eric Ou, and Ruiqi Lau a/k/a Ricky Liu
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 26158 / October 15, 2024
Securities and Exchange Commission v. ZM Quant Investment Ltd., Baijun Ou a/k/a Eric Ou, and Ruiqi Lau a/k/a Ricky Liu, No. 1:24-cv-12587-AK (D. Mass. filed Oct. 9, 2024)
SEC Charges So-Called Market Maker and Two Employees in Crackdown on Manipulation of Crypto Assets Offered and Sold as Securities
The Securities and Exchange Commission announced fraud charges against British Virgin Islands-registered entity ZM Quant Investment Ltd., a self-proclaimed crypto asset market maker, and its employees Baijun Ou and Ruiqi Lau for engaging in schemes to manipulate the markets for “Saitama Inu,” “SaitaRealty,” and “NexFundAI”—crypto assets being offered and sold as securities to retail investors. As alleged, the schemes were intended to induce investor victims to purchase the crypto assets by creating the false appearance of an active trading market for them.
According to the SEC’s complaint, crypto asset promoters Russell Armand, Maxwell Hernandez, Manpreet Singh Kohli, and Nam Tran (Promoters) hired so-called market maker ZM Quant to provide market-manipulation-as-a-service, which included generating artificial trading volume or manipulating the price of the Saitama Inu and SaitaRealty crypto assets that the Promoters offered and sold as securities to retail investors in unregistered transactions. The complaint also alleges that ZM Quant undertook a similar scheme to manipulate the market of NexFundAI, a crypto asset offered and sold as a security that was created at the direction of the Federal Bureau of Investigation as part of its parallel investigation into potential market manipulation in the crypto asset industry. The SEC alleges that ZM Quant, Ou, and Lau manipulated markets on behalf of the Promoters by self-trading (commonly referred to as “wash trading”) on popular crypto asset trading platforms or by engaging in other trading practices that likewise served no economic purpose, and that they used an algorithm (or bot) that, at times, generated quadrillions of transactions and billions of dollars of artificial trading volume each day.
The SEC’s complaint, filed in the United States District Court for the District of Massachusetts, charges ZM Quant, Ou, and Lau with violating Sections 17(a)(1) and (3) of the Securities Act of 1933, and Sections 9(a)(2) and 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a) and (c) thereunder. The complaint seeks permanent injunctions, conduct-based injunctions, disgorgement of allegedly ill-gotten gains plus interest, and civil penalties.
The SEC appreciates the assistance of the FBI and the United States Attorney’s Office for the District of Massachusetts, which has announced a parallel criminal action.
The SEC’s investigation was conducted by David D’Addio, Amy Harman Burkart, Ivan Panchenko, Jeffrey Cook, and John McCann in the SEC’s Boston Regional Office, as well as Colin Missett and Joy Guo of the Crypto Asset and Cyber Unit (CACU). They were supervised by Amy Gwiazda, Michael Brennan, Donald Battle, and Jorge Tenreiro of CACU and by Celia Moore and John T. Dugan of the Boston Regional Office. The team also thanks the staff of the SEC’s Office of Strategic Hub for Innovation and Financial Technology for their assistance. The litigation will be led by Mr. D’Addio and Ms. Burkart.