Federal prosecutors have charged four alleged market makers, a few crypto projects, and more than a dozen individuals with manipulating various crypto markets. The charges were filed on Wednesday, accusing them of profiting from fees and selling manipulated coins at inflated prices. The charges reveal that companies like Gotbit, CLS Global, MyTrade, and ZM Quant engaged in wash trading to create the illusion of legitimate activity and then sold these tokens at artificially high prices to other investors. They also marketed these coins on different platforms and convinced exchanges to let them buy tokens with reduced fees.
The U.S. Securities and Exchange Commission (SEC) also brought charges against ZM Quant, Gotbit, and CLS Global, along with several employees and individuals described as “crypto asset promoters.” The cases were referred to prosecution by the SEC over two years ago. The market maker defendants claimed to be legitimate market makers publicly but offered illegal services like wash trading privately. Gotbit’s co-founder, Alexey Andryunin, openly discussed the wash trading services he provided to clients, admitting that the business was not registered in any jurisdiction because it was “not entirely ethical.” Separate criminal charges have been filed against Andryunin.
ZMQuant was registered in the British Virgin Islands, but its employees were based in Hong Kong, while Gotbit employees are believed to be Russian. The manipulated tokens included Robo Inu, which saw a pump after the indictment was unsealed. Other tokens like VZZN and Saitama were also mentioned in the indictments, all classified as securities. The FBI created an Ethereum-based cryptocurrency called NextFundAI during their investigation with the help of cooperating witnesses to identify and bring the alleged fraudsters to justice. The token is also classified as a security, and trading on it was disabled during a press call on Wednesday.
The Acting U.S. Attorney for the District of Massachusetts, Joshua Levy, mentioned that the DOJ has already secured about $25 million in fraudulent proceeds that will be returned to investors. While the total amount generated by the defendants was not disclosed, efforts are being made to compensate the victims of the market manipulation and fraud. The investigation involved the FBI, which played a crucial role in uncovering the fraudulent activities within the crypto markets.
It is essential for investors to be cautious and vigilant when engaging in the cryptocurrency market to avoid falling victim to such fraudulent schemes. The charges brought against the market makers and individuals involved in manipulating crypto markets serve as a reminder of the risks associated with investing in digital assets. As the industry continues to evolve, regulatory authorities are stepping up their efforts to crack down on illegal activities and protect investors from potential harm. By staying informed and conducting due diligence, investors can mitigate the risks and make informed decisions when participating in the crypto market.
