US accuses three companies and 15 people of cryptocurrency fraud
Three cryptocurrency companies and 15 people have been accused of involvement in widespread fraud and market manipulation following an investigation in which the FBI for the first time ordered the creation of a new digital token to help authorities track crime.
Federal prosecutors in Boston have charged the firms Gotbit, ZM Quant, CLS Global and the leaders and employees of these and other companies in a takedown that led to four arrests, agreements by five people to plead guilty and the seizure of more than 25 million dollars (roughly Rs. 209 crore) worth of cryptocurrency.
Acting U.S. Attorney Joshua Levy said the defendants engaged in sham trades to artificially inflate the trading volume of various cryptocurrency tokens before selling them, “leaving innocent investors left holding the bag.”
“This is a case where new age technology, crypto, meets an old-fashioned fraud, in this case a ‘pump and dump’ scheme, which is as old as the stock markets,” Levy told reporters.
As part of the investigation, the FBI directed the creation of a cryptocurrency company, NexFundAI, which 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 they were carefully monitoring to minimize the risk of retail investors buying it before trading was disabled. The U.S. Securities and Exchange Commission has also filed related civil cases.
Prosecutors said Saitama, the largest of the companies involved, at one point had a market value of $7.5 billion (about Rs. 62,971 crore) after its leadership began manipulating trading in its tokens and selling them secretly.
Its CEO, Manpreet Kohli, was arrested in Britain on Monday. Five other current or former employees were also charged, and three have pleaded guilty.
Others charged included Aleksei Andriunin, CEO of Gotbit, a cryptocurrency “market maker” based in Russia and Portugal. He was arrested in Portugal on Tuesday. Two employees of his company in Russia were also charged.
Prosecutors said that between 2018 and 2024, Gotbit engaged in “wash trading,” a form of sham trading, and market manipulation on behalf of various cryptocurrency clients to artificially increase trading volume for their tokens.
Also charged were four other individuals who worked at cryptocurrency “market makers,” which prosecutors said offered market manipulation services to clients.
They are Liu Zhou, the founder of market maker MyTrade, who has agreed to plead guilty, according to court papers; Riqui Liu from the UK and Hong Kong and Baijun Ou from Hong Kong, both of whom worked at ZM Quant; and Andrey Zhorzhes from the United Arab Emirates, an employee of CLS Global.
They were not immediately available for comment.
Others charged 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 fraudulently sold his crypto company, Lillian Finance, promoted.
© Thomson Reuters 2024
