In a major federal crackdown, three cryptocurrency companies and 15 individuals face charges of widespread fraud and market manipulation. The operation, led by the FBI, included the creation of a digital token to aid in exposing illicit activities in the crypto market.
On Wednesday, 9 October 2024, federal prosecutors in Boston announced charges against the firms Gotbit, ZM Quant, and CLS Global, alongside leaders and employees from these and other associated companies, according to an official press release.
The takedown has resulted in four arrests, five individuals agreeing to plead guilty, and the seizure of over $25 million in cryptocurrency assets.
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Defendants Used Wash Trading To Inflate Trading Volumes
Acting US Attorney Joshua Levy said that the defendants orchestrated “sham trades” to artificially inflate the trading volumes of various crypto tokens.
This fraudulent activity, known as a “pump and dump” scheme, misled investors by creating the illusion of market interest before the manipulators sold off their holdings, leaving investors with worthless tokens.
“Wash trading has long been outlawed in the financial markets, and cryptocurrency is no exception. These are cases where an innovative technology – cryptocurrency – met a century old scheme – the pump and dump,” Levy said.
#BREAKING: As a result of an #FBI Boston investigation, 18 individuals & entities have been charged in connection with 'Operation Token Mirrors,' an international operation targeting widespread fraud & manipulation in the cryptocurrency markets. https://t.co/qRKzszOjjt pic.twitter.com/mllB7bUWow
— FBI Boston (@FBIBoston) October 9, 2024
The FBI played a pivotal role in the investigation, overseeing the creation of a crypto company called NexFundAI. NexFundAI’s token, built on the Ethereum blockchain, was used to lure the accused into fraudulent activities.
ZM Quant, CLS Global, and another firm, MyTrade, allegedly conspired to manipulate the token’s trading volume. Authorities monitored the token closely to prevent unsuspecting retail investors from getting involved, disabling trading once evidence was gathered.
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SEC Files Civil Suits Against Involved Parties
The US Securities and Exchange Commission (SEC) also filed related civil suits against the involved parties. The suit emphasized the legal consequences of market manipulation in the digital asset space.
Among those charged is Manpreet Kohli, CEO of Saitama, a company that once boasted a market valuation of $7.5 billion. Authorities accused Saitama of manipulating the trading of its tokens and secretly offloading them.
Kohli was arrested in the UK. While other key figures from the firm face charges, three people having already pleaded guilty. Aleksei Andriunin, the CEO of Gotbit, was arrested in Portugal. His company, known as a cryptocurrency “market maker,” allegedly engaged in “wash trading” from 2018 to 2024, inflating trading volumes for clients. Two employees from Gotbit in Russia were also charged in connection with the scheme.
Additional charges were brought against Liu Zhou, founder of MyTrade, who has agreed to plead guilty, as well as Riqui Liu and Baijun Ou of ZM Quant, and Andrey Zhorzhes of CLS Global.
Prosecutors also charged Michael Thompson of Virginia, associated with a company founded by a former Saitama employee, and Bradley Beatty of Florida, accused of falsely promoting his crypto venture, Lillian Finance.
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Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.
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