Three cryptocurrency companies and 15 individuals have been charged with engaging in widespread fraud and market manipulation following an investigation in which the FBI first ordered the creation of a new digital token to help authorities detect crime.
Federal prosecutors in Boston charged Gotbit, ZM Quant, CLS Global and executives and employees of those and other companies in a takedown that led to four arrests, five people’s guilty pleas and the seizure of more than $25 million (roughly 209 million rupees). in cryptocurrency.
Acting US Attorney Joshua Levy said the defendants engaged in fraudulent trades to artificially inflate the trading volume of various cryptocurrency tokens before selling them, “leaving innocent investors in the lurch.”
“This is a case where new age technology, crypto, meets an old school scam, in this case a ‘pump and dump’ scheme, which is as old as the stock market,” Levy told reporters.
As part of the investigation, the FBI directed the creation of a cryptocurrency company, NexFundAI, that had a token on the Ethereum blockchain that prosecutors said ZM Quant, CLS Global and another company, MyTrade, agreed to help manipulate.
Authorities said the token was being traded, but that they were monitoring closely to reduce the risk that retail investors could buy it before disabling trading. The US Securities and Exchange Commission has also brought related civil suits.
Prosecutors said Saitama, the largest of the companies involved, at one point had a market value of $7.5 billion (roughly 62,971 crore rupees) after its management began manipulating the trading of its tokens and secretly selling them.
Its CEO Manpreet Kohli was arrested in the UK on Monday. Five other current or former employees were charged, and three pleaded guilty.
Other defendants included Aleksey Andriunin, CEO of Gotbit, a cryptocurrency “market maker” who lived in Russia and Portugal. He was arrested on Tuesday in Portugal. Two employees of his company in Russia were also charged.
Prosecutors said that from 2018 to 2024, Gotbit engaged in “wash trading,” a form of fraudulent trading and market manipulation on behalf of several cryptocurrency clients to artificially inflate the trading volume of their tokens.
Also charged were four other people who worked at cryptocurrency “market makers” that prosecutors said advertised market manipulation services to clients.
They are Liu Zhou, the founder of market maker MyTrade, who, according to court papers, has agreed to plead guilty; Riqui Liu from the UK and Hong Kong and Baijun Ou from Hong Kong, who both worked at ZM Quant; and Andrey Zhorzhes from the United Arab Emirates, an employee of CLS Global.
They could not immediately be reached for comment.
The other defendants were Michael Thompson of Virginia, who worked at a cryptocurrency company called VZZN founded by a former Saitama employee, and Bradley Beatty of Florida, who prosecutors said falsely promoted his crypto company, Lillian Finance.
© Thomson Reuters 2024