U.S. authorities, including the Securities and Exchange Commission (SEC), the Federal Bureau of Investigation (FBI), and the Department of Justice (DOJ), have charged Gotbit and four other cryptocurrency firms with engaging in widespread market manipulation practices.
SEC Targets Multiple Firms for Wash Trading and Pump-and-Dump Schemes in Meme Coin Market
On October 9, the SEC released a statement alleging that Gotbit, ZM Quant, CLS Global, and MyTrade MM employed automated bots to artificially inflate trading volumes on centralized exchanges (CEXs) through a tactic known as wash trading. This practice involves buying and selling the same asset to create misleading market activity.
A concurrent announcement from the Massachusetts U.S. Attorney’s office identified notable meme coin projects, including Saitama and Robo Inu, as part of the complaints.
The SEC accused these firms of orchestrating “pump and dump” schemes, whereby they misrepresented the value of specific tokens. This manipulation lured unsuspecting investors into purchasing tokens at inflated prices, allowing the perpetrators to profit by selling their holdings before the prices collapsed.
$25 Million in Cryptocurrency Seized in Major Crackdown on Fraudulent Trading Practices
In total, law enforcement officials seized approximately $25 million in cryptocurrency and deactivated bots responsible for executing millions of fraudulent transactions across 60 different crypto assets. This extensive investigation aimed to protect retail investors from deceptive market practices.
Key Figures in Cryptocurrency Fraud Case Plead Guilty Amid Market Manipulation Allegations
Among those implicated in the investigations are Russell Armand, Maxwell Hernandez, and Manpreet Kohli, who, along with Saitama employees Nam Tran and Vy Pham, allegedly provided market manipulation services using Gotbit and ZM Quant. Kohli and Tran face additional charges related to conspiracy to commit wire fraud and operating an unlicensed money-transmitting business.
The U.S. Attorney’s office confirmed that Armand and Hernandez have already pleaded guilty to similar charges as those brought against Kohli and Tran. California-based Pham has also admitted involvement in unlawful activities at Saitama and another unnamed cryptocurrency firm.
Investigators Uncover Extensive Bot-Driven Trading Manipulation Affecting Retail Investors
Other individuals indicted in the U.S. District Court in Boston include Gotbit’s Aleksei Andriunin, Fedor Kedrov, and Qawi Jalili, along with Riqui Liu and Baijun Ou from ZM Quant.
The investigation, which commenced in 2017, revealed that the suspects used bots to generate quadrillions of fake transactions, leading to billions in artificial trading volume daily. This manipulation caused innocent retail investors to purchase tokens at inflated prices, ultimately resulting in significant financial losses when Gotbit and its co-defendants liquidated their holdings.
FBI's Infiltration Strategy: NexFundAI Exposes Market Manipulators in Crypto Investigation
A pivotal moment in the investigation occurred when the FBI developed a cryptocurrency called NexFundAI to infiltrate the market-making firms. Designed to appear as a legitimate project merging cryptocurrency and artificial intelligence, NexFundAI successfully attracted market manipulators who believed they could exploit it for their own gains. At the time of this writing, NexFundAI was still actively trading, with a market capitalisation of approximately $237,000.
This case underscores the urgent need for regulatory oversight in the cryptocurrency sector to protect investors from fraudulent activities and ensure market integrity.
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Alex