The U.S. Department of Justice (DOJ) has unsealed a comprehensive indictment against eighteen individuals and companies accused of manipulating cryptocurrency markets and artificially boosting token prices. This is the first case of its kind where financial services firms are being prosecuted for crypto market manipulation.
Central to the investigation was a unique approach by the Federal Bureau of Investigations (FBI), which created a fake cryptocurrency token and company to ensnare the alleged offenders. This new method led to the exposure of an intricate operation aimed at inflating the value of specific cryptocurrencies, notably targeting a firm with a market value in the billions.
FBI Creates Fake Token to Expose Fraud
The indictment outlines how the FBI developed a token called NexFundAI on the Ethereum blockchain as part of a broader sting operation. Investigators used the token to engage with market makers who offered illegal wash trading services, a practice where fake buy and sell orders are placed to manipulate market activity.
The FBI’s undercover operation allowed them to track and meet with the key players behind the scheme. One of the defendants even described himself as the “mastermind,” bragging about using automated bots to generate false trading volumes.
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A Century-Old Scheme Reappears in a Modern Market
The practice of market manipulation is not new, and this case highlights a digital version of the age-old "pump and dump" scheme, where the value of assets is inflated to deceive investors. While crypto markets have often been accused of such manipulation, this is the first large-scale case brought forward by the DOJ involving market makers and firms specifically providing wash trading services.
The investigation led to the indictment of three market makers and their employees, who prosecutors claim were paid to create artificial demand for tokens. The DOJ has also brought charges against Saitama, a Massachusetts-based crypto firm that allegedly manipulated its token price to create a market cap of $7.5 billion. Executives at Saitama are accused of selling off their tokens for tens of millions in profits while falsely boosting the token’s value with the help of external manipulators like Gotbit.
International Reach and Legal Consequences
Some of the defendants operated internationally, with several key figures based in Portugal and Russia. One such individual, Aleksei Andriunin, the CEO of Gotbit, was arrested in Portugal and now faces extradition to the U.S. Andriunin had previously bragged about his company’s unethical manipulation of trade volumes on crypto exchanges.
The charges brought by the DOJ are accompanied by civil complaints from the Securities and Exchange Commission (SEC), which has accused Andriunin and Gotbit of violating securities laws.
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A Broader Legal Response
In addition to the criminal charges, the SEC is seeking permanent injunctions against Gotbit and its team, alongside the disgorgement of all profits gained from illegal market manipulation. The SEC’s civil complaint further illustrates how on-demand market manipulation services have contributed to misleading investors and distorting the actual value of crypto tokens.
The combined efforts of the DOJ, SEC, and FBI mark a significant step towards regulating and policing the crypto markets. With five defendants already agreeing to plead guilty, the case could signal a turning point in the legal crackdown on illegal activities within the cryptocurrency sector.
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