On Wednesday, federal investigators charged three crypto organizations and fifteen individuals with massive fraud and market manipulation. This action follows an inquiry in which the FBI, for the first time, developed a new digital token to aid in the detection of illicit activity.
Prosecutors in Boston charged Gotbit, ZM Quant, CLS Global, and their CEOs and employees, among other companies. This crackdown resulted in four arrests and five plea deals. Authorities also recovered cryptocurrencies worth more than $25 million.
As per Cryptonews, – The corporations reportedly participated in wash trading using digital tokens to artificially increase their prices. This strategy drew fresh investors. According to federal claims filed on Wednesday, the defendants subsequently sold their tokens in a “pump and dump” scam.
Top executives from Saitama and Gotbit were arrested.
Saitama, the largest of these cryptocurrency startups, has a market capitalization in the billions. Manpreet Kohli, its CEO, was arrested on Monday in the United Kingdom. Five other current or former employees were charged, with three pleading guilty.
Another person charged is Aleksei Andriunin, the CEO of Gotbit, a cryptocurrency “market maker” based in Russia and Portugal. He was arrested in Portugal on Tuesday. Two of his company’s Russian workers were also charged.
Prosecutors said that from 2018 until 2024, Gotbit participated in wash trading and market manipulation on behalf of multiple bitcoin clients. This behavior contributed to artificially high trading volumes for their tokens.
“These are cases where an innovative technology, cryptocurrency, met a century-old scheme, the pump and dump,” said Acting US Attorney Joshua Levy. “The message today is, if you make false statements to trick investors, that’s fraud.”
Allegations of Market Makers Exploiting Buyers by Crypto Companies
The cryptocurrency corporations allegedly engaged “market makers” to wash trade their tokens for cash. One market maker defendant, who agreed to plead guilty, explained the practice to a potential customer.
The “objective on the secondary markets” is to recognize “other buyers from the community, people you don’t know about or don’t care about,” since “we have to make [the other buyers] lose money in order to make profit.”
The Role of the FBI’s Fake Token in Unraveling Major Crypto Market Manipulation Cases
According to the Department of Justice, the FBI developed a token called NexFundAI as part of their investigation, known as “Operation Token Mirrors.” It claimed that ZM Quant, CLS Global, and MyTrade washed or collaborated to wash the token, which means they manipulated trade to make the figures look better. A fourth market maker, Gotbit, together with its CEO and two directors, has been charged with carrying out a similar plan.
Four additional individuals who worked for cryptocurrency market makers were also charged. Prosecutors stated that these individuals promoted market manipulation services to clients.
They include Liu Zhou, creator of market maker MyTrade, who has decided to plead guilty, according to court documents. Also charged are Riqui Liu of the United Kingdom and Hong Kong, and Baijun Ou of Hong Kong, who both worked at ZM Quant; and Andrey Zhorzhes of the United Arab Emirates, an employee of CLS Global.
Others charged include Michael Thompson of Virginia, who worked for VZZN, a cryptocurrency company formed by a former Saitama employee, and Bradley Beatty of Florida, who authorities claim fraudulently advertised his cryptocurrency company, Lillian Finance.
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