Federal Authorities Charge Three Crypto Firms and 15 Individuals in Market Manipulation and Fraud Case

Federal Authorities Charge Three Crypto Firms and 15 Individuals in Market Manipulation and Fraud Case

Federal prosecutors have charged three cryptocurrency companies and 15 individuals with extensive fraud and market manipulation. This groundbreaking action, part of an ongoing federal investigation, saw the FBI create a digital token to help expose criminal activity in the crypto space for the first time.

Prosecutors in Boston charged Gotbit, ZM Quant, CLS Global, and several executives from these firms with orchestrating a complex scheme of "wash trading" to inflate token prices artificially. This fraudulent activity attracted unsuspecting investors, leading to a large-scale "pump and dump" operation. As part of the crackdown, federal authorities arrested four people and reached plea agreements with five others. Additionally, over $25 million in cryptocurrency was seized.

Executives from Saitama and Gotbit Face Arrests

Among those arrested was Manpreet Kohli, CEO of Saitama, a major crypto company with a market valuation once in the billions. Kohli was detained in the UK, and several of his employees have either been charged or pleaded guilty. Aleksei Andriunin, CEO of Gotbit, a market maker, was arrested in Portugal. Federal authorities accuse Andriunin and his company of engaging in wash trading and market manipulation from 2018 to 2024, inflating trading volumes to deceive investors.

U.S. Attorney Joshua Levy highlighted the nature of the fraud, stating: "This case shows that an innovative technology—cryptocurrency—was used in a century-old scam—the pump and dump."

Crypto Companies Used Market Makers to Exploit Investors

The accused companies allegedly hired market makers, like Gotbit and others, to execute wash trading, manipulating token prices to attract buyers and inflate the apparent value of their digital assets. In some instances, those working for these market makers explicitly described how the practice deceived investors into buying worthless tokens, ultimately resulting in financial losses for those buyers.

FBI's Fake Token Exposes Widespread Crypto Fraud

As part of "Operation Token Mirrors," the FBI created a digital token called NexFundAI to trap individuals and companies involved in market manipulation. The investigation revealed that companies like ZM Quant, CLS Global, and MyTrade manipulated NexFundAI’s market numbers through fraudulent trading activities. Gotbit and its leadership were also implicated in a similar scheme.

In total, four individuals working for market makers were charged. Liu Zhou, founder of MyTrade, agreed to plead guilty, while others from ZM Quant and CLS Global, including employees from the UK, Hong Kong, and the UAE, also face charges. Additional charges were brought against Michael Thompson, who worked at VZZN, and Bradley Beatty of Lillian Finance, both of whom were involved in fraudulent promotion activities.

This case marks a significant move by federal authorities to clamp down on cryptocurrency-related fraud and market manipulation schemes that have flourished in recent years.