October 14, 2024
By Our Correspondent
Three cryptocurrency firms and 15 individuals have been indicted for extensive fraud and market manipulation, following an investigation in which the US Federal Bureau of Investigation (FBI) initiated the development of a new digital token to assist in uncovering criminal activities, as reported by Reuters.
Federal prosecutors in Boston have charged the companies Gotbit, ZM Quant, and CLS Global, along with their executives and employees, in a crackdown that has resulted in four arrests, guilty pleas from five individuals, and the confiscation of over $25 million in cryptocurrency. Acting US Attorney Joshua Levy stated that the defendants engaged in fictitious trades to artificially boost the trading volume of various cryptocurrency tokens before liquidating their holdings, ultimately leaving unsuspecting investors at a loss.
“This case exemplifies the intersection of modern technology, specifically cryptocurrency, with traditional fraud schemes, such as the ‘pump and dump’ tactic, which has been prevalent since the inception of stock markets,” Levy informed the press.
The FBI established a counterfeit cryptocurrency to apprehend ‘pump and dump’ fraudsters. As part of the investigation, the FBI oversaw the formation of a cryptocurrency entity, NexFundAI, which launched a token on the Ethereum blockchain that prosecutors allege ZM Quant, CLS Global, and another firm, MyTrade, conspired to manipulate.
Authorities indicated that while the token was traded, they closely monitored the activity to reduce the risk of retail investors purchasing it before halting trading. The US Securities and Exchange Commission has also initiated related civil actions.
Prosecutors noted that Saitama, the largest company implicated, once boasted a market capitalization of $7.5 billion, following its leadership’s manipulation of token trading and clandestine sales. Its CEO, Manpreet Kohli, was apprehended last Monday in the United States.
Five additional current or former employees have also been indicted, with three having entered guilty pleas. Among those charged is Aleksei Andriunin, the CEO of Gotbit, a cryptocurrency market-making firm with residences in Russia and Portugal. He was apprehended in Portugal on Tuesday.
Two employees from his company based in Russia have also faced charges. Prosecutors allege that from 2018 to 2024, Gotbit participated in “wash trading,” a deceptive trading practice, and engaged in market manipulation for various cryptocurrency clients to artificially boost the trading volumes of their tokens. Additionally, four other individuals associated with cryptocurrency market-making firms have been charged, as prosecutors claim they offered market manipulation services to their clients.
These individuals include Liu Zhou, the founder of MyTrade, who has reportedly agreed to plead guilty; Riqui Liu and Baijun Ou, both of whom worked at ZM Quant and are based in the United Kingdom and Hong Kong; and Andrey Zhorzhes from the United Arab Emirates, an employee of CLS Global.
Also charged are Michael Thompson from Virginia, who was employed at a cryptocurrency firm named VZZN, established by a former employee of Saitama, and Bradley Beatty from Florida, who is accused by prosecutors of fraudulently promoting his cryptocurrency venture, Lillian Finance.
