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Authorities Announce Charges Against Three Companies and Fifteen Individuals in Cryptocurrency Manipulation Investigation
On Wednesday, federal prosecutors charged three cryptocurrency firms and 15 individuals with extensive fraud and market manipulation. This development follows an investigation in which the FBI created a new digital token for the first time to aid in identifying criminal activities.
Prosecutors in Boston brought charges against Gotbit, ZM Quant, CLS Global, along with the leaders and employees of these and other firms. This enforcement action led to four arrests and five plea agreements. Authorities also confiscated cryptocurrency valued at over $25 million.
The companies are accused of engaging in wash trading with digital tokens to artificially boost their prices, thereby attracting new investors. According to federal allegations made on Wednesday, the defendants subsequently sold their tokens in a “pump and dump” operation.
Top Executives from Saitama and Gotbit Arrested
Saitama, the largest among these cryptocurrency firms, once held a market valuation in the billions. Its CEO, Manpreet Kohli, was apprehended on Monday in the UK. Five other current or former employees were also charged, with three having pleaded guilty.
Aleksei Andriunin, the CEO of Gotbit, a crypto “market maker” residing in Russia and Portugal, is another individual charged. He was arrested in Portugal on Tuesday, along with two of his company’s employees in Russia who were also charged.
Prosecutors indicated that from 2018 to 2024, Gotbit participated in wash trading and market manipulation on behalf of various cryptocurrency clients. This conduct contributed to the artificial inflation of trading volumes for their tokens.
“These are instances where an innovative technology – cryptocurrency – intersected with a century-old scheme – the pump and dump,” stated Acting US Attorney Joshua Levy. “The message today is, if you make false statements to deceive investors, that constitutes fraud.”
The US SEC, FBI, and DOJ have filed lawsuits against #Gotbit and other crypto firms for alleged fraud and market manipulation. #Gotbit previously asserted that they sold $WATER to adjust the price to a fair level.
However, #Gotbit sold significantly more tokens than they purchased! https://t.co/qtYsQvX6OB pic.twitter.com/8OWV5qOnMi— Lookonchain (@lookonchain) October 10, 2024
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Crypto Firms Allegedly Engaged Market Makers to Exploit Buyers
The cryptocurrency companies are accused of employing firms, referred to as “market makers,” to wash trade their tokens for compensation. One defendant from a market-making firm, who agreed to plead guilty, explained the practice to a potential client.
He stated that the “goal in the secondary markets” is to identify “other buyers from the community, individuals you are unaware of or indifferent to,” because “we must ensure [the other buyers] incur losses to generate profit.”
FBI’s Fake Token Sparks Significant Crypto Market Manipulation Charges
The Department of Justice revealed that the FBI developed a token named NexFundAI as part of its investigation, termed “Operation Token Mirrors.” It alleged that ZM Quant, CLS Global, and MyTrade engaged in wash trading of the token or conspired to do so—that is, they manipulated trading to enhance the numbers’ appeal. A fourth market maker, Gotbit, its CEO, and two of its directors are also charged with executing a similar scheme.
Four additional individuals associated with cryptocurrency market makers were also charged. Prosecutors indicated that these individuals promoted market manipulation services to clients.
Among them is Liu Zhou, the founder of market maker MyTrade, who, according to court documents, has agreed to plead guilty. Also charged are Riqui Liu from the UK and Hong Kong, and Baijun Ou from Hong Kong, both of whom worked at ZM Quant; as well as Andrey Zhorzhes from the UAE, an employee of CLS Global.
Others charged include Michael Thompson from Virginia, who was employed at a crypto company named VZZN, founded by a former Saitama employee, and Bradley Beatty from Florida, whom prosecutors allege fraudulently promoted his crypto company, Lillian Finance.
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