Game Coin Project’s Blockchain Engineer Eric Zhu Settles Fraud Claims with SEC
After being accused of orchestrating a rug pull scheme that defrauded investors in the Game Coin token (GME), Eric Zhu, the blockchain engineer for the project, has reached a settlement with the US Securities and Exchange Commission (SEC). The SEC alleged that Zhu misappropriated $553K from GME investors for personal gain by selling the token as a security through liquidity pools. If the court approves the settlement, Zhu will pay nearly $823K as part of the final judgment.
GME Developer Agrees to Pay $823K in SEC Settlement
Eric Zhu, a seasoned blockchain engineer, was hired to work on coding for the Game Coin project. The token was introduced to the public through liquidity pools for trading crypto assets. As per the settlement terms, Zhu will pay $553K in restitution, $120K in prejudgment interest, and a $150K civil penalty without admitting any wrongdoing.
Liquidity providers receive LP tokens when they deposit a crypto asset token pair into a liquidity pool. In a rug pull scenario, providers suddenly withdraw their funds, causing the token’s value to plummet and resulting in losses for investors. The SEC accussed Zhu of executing such a scheme with GME tokens.
The SEC highlighted that Game Coin and its founders falsely claimed that liquidity was locked in a social media post, indicating that LP tokens were inaccessible to the issuers or insiders. However, certain LP tokens were moved to a blockchain address controlled by Zhu, who eventually used them to conduct the rug pull. This action led to a $553,000 token sale and a 12% drop in GME price.
Transition of Top SEC Officials
The resolution of Eric Zhu’s case marks one of the final victories for the SEC under the leadership of Gary Gensler. Nonetheless, Gensler has urged the commission to enhance its oversight of the cryptocurrency sector, particularly altcoins.
Following Donald Trump’s election victory, the digital assets industry experienced significant changes. Trump’s nomination of Paul Atkins, a supporter of crypto initiatives, as the new SEC Chairman indicates potential shifts in regulatory approach. The price of BTC has surged by more than 50% in the last 90 days, reaching $108k.
The SEC also announced the departure of Sanjay Wadhwa, the Acting Director of the Division of Enforcement, by January 31, 2025.
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