Reuters reported that three cryptocurrency firms and 15 individuals have been charged with widespread fraud and market manipulation after a federal investigation, in which the FBI for the first time created a digital token to assist in uncovering criminal activity.

Prosecutors in Boston filed charges against Gotbit, ZM Quant, CLS Global, and their leaders, as well as other companies. This operation resulted in four arrests, five plea agreements, and the seizure of over $25 million in cryptocurrency. Acting U.S. Attorney Joshua Levy explained that the accused engaged in fake trades to inflate cryptocurrency token trading volumes before selling off the tokens, leaving investors with significant losses. Levy described the scheme as a “pump and dump” operation, likening it to fraud schemes as old as the stock market.

As part of the investigation, the FBI launched a cryptocurrency company called NexFundAI, which issued a token on the Ethereum blockchain. ZM Quant, CLS Global, and another firm, MyTrade, allegedly agreed to help manipulate the token’s trading. Authorities ensured that trading was closely monitored to prevent retail investors from buying in before disabling trading. The U.S. Securities and Exchange Commission (SEC) also filed related civil cases.

Saitama, the largest company implicated, once had a market value of $7.5 billion, but prosecutors allege that its leadership manipulated the token’s trading and secretly sold their holdings. Its CEO, Manpreet Kohli, was arrested in the UK on Monday, with five other current or former employees also facing charges—three of whom have already pleaded guilty.

Additional charges were brought against Aleksei Andriunin, CEO of Gotbit, a cryptocurrency “market maker” based in Russia and Portugal. He was arrested in Portugal, while two of his Russian employees were also charged. From 2018 to 2024, Gotbit allegedly engaged in wash trading and market manipulation to boost token trading volumes for various clients.

Four other individuals involved with cryptocurrency “market makers” were also charged, accused of offering market manipulation services. These include Liu Zhou, founder of MyTrade, who has agreed to plead guilty, as well as Riqui Liu and Baijun Ou of ZM Quant, and Andrey Zhorzhes of CLS Global. Two others facing charges are Michael Thompson of Virginia, connected to the cryptocurrency company VZZN, and Bradley Beatty of Florida, who allegedly promoted his company Lillian Finance using fraudulent claims.

Resources:

Reuters