Shortly after 3 p.m. today in Boston, prosecutors charged 14 people with federal crimes involving at least four crypto companies: GotBit, CLS Global, MyTrade and ZM Quant. According to the indictment, this enforcement action is “the first criminal prosecution against financial services companies for market manipulation and fictitious trading in the crypto industry.”
Employees at MyTrade, ZM Quant, and CLS Global were so eager to accept new customers that they even began trading a federally created token, NexFundAI. Caught in the act, the police intervened to close their trading accounts.
Apparently, the targets of this indictment engaged in widespread fraud and price manipulation of crypto assets, among other things, by practicing pumping and dumping under the guise of “market making.” Four defendants have already pleaded guilty and authorities have already seized more than $25 million in crypto assets.
The alleged market manipulation schemes involved 60 separate crypto assets, including Saitama, which once reached a market capitalization of $7.5 billion.
Among these crypto assets was NexFundAI, a token created at the direction of law enforcement as part of the investigation. Jodi Cohen, Special Agent in Charge of the Federal Bureau of Investigation, Boston Division, noted in the press release that “the FBI has taken the unprecedented step of creating its own cryptocurrency token and company to identify, disrupt and bring these suspected fraudsters to justice.”
The Securities and Exchange Commission (SEC) also filed a parallel civil action.
Crypto Market Manipulation as a Service
The SEC names Russell Armand, Maxwell Hernandez, Manpreet Singh Kohli, Nam Tran and Vy Pham who allegedly hired so-called “market makers” ZM Quant and Gotbit to provide, rather than actual market makers, market manipulation as a service. This illegal conduct induced investments “by creating the false appearance of an active trading market,” according to the SEC.
GotBit claimed to offer services as a market maker – a controlled term that bad actors in the cryptocurrency industry have borrowed for their own purposes to describe a range of non-market making activities, such as trading services. for own account and digital marketing.
Read more: Justin Sun ran laundry trading scheme from his US apartment, SEC claims
In a pitch deck apparently from GotBit that was distributed by Virtual Versions, GotBit claimed “during the first few minutes of the price discovery phase, we will push the price up to 10x to create FOMO and accumulate as much price power as possible.” purchase as possible to reach the extreme X and sell as many tokens as possible during the next peak.
According to the SEC, ZM Quant employees Baijun Ou and Ruiqi Lau, Gotbit employee Fedor Kedrov, and CLS Global employee Andrey Zhorzhes self-traded, manipulated markets, and engaged in commercial practices with no economic purpose to create an artificial volume of transactions every day.
At times, according to the complaint, these employees generated quadrillions of transactions and billions of dollars in false transactions.
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