Just after 3pm this afternoon, prosecutors in Boston indicted 14 people on 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 of a financial services company for market manipulation and sham transactions in the virtual currency space.”
The individuals in this indictment reportedly engaged in widespread fraud and manipulation of crypto asset prices, including through pump-and-dumping under the guise of “market making.” Four defendants have already pleaded guilty, and authorities have already seized $25 million worth of crypto assets.
The SEC also filed a parallel civil suit.
The alleged market manipulation scheme involved 60 different crypto assets, including Saitama, which once had 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. Jody Cohen, Special Agent in Charge of the Federal Bureau of Investigation's Boston Division, said in a press release: justice. “
Cryptocurrency market operations as a service
The SEC hired so-called “market makers” ZM Quanto and Gotbitt to do the actual market-making. Market operations as a service. The illegal activity induced investment “by creating the false appearance of an active trading market,” according to the SEC.
GotBit claimed to serve as a market maker. This is a controlled term that describes a range of non-market-making activities, such as proprietary trading and digital marketing services, that bad actors in the cryptocurrency industry have borrowed for their own purposes.
read more: SEC alleges Justin Sun directed wash trading scheme from his U.S. apartment
For example, in pitch materials that appear to belong to GotBit and distributed by Virtual Versions, GotBit claims that “during the first few minutes of the price discovery phase, we create FOMO by pushing the price up to 10x to accumulate as many buys as possible. I intend to do so,'' he claimed. We will do everything possible to reach extreme X and sell maximum tokens on subsequent spikes. ”
According to the SEC, ZM Quant employees Baijun Ou and Ruiqi Lau, Gotbit employee Fedor Kedrov, and CLS Global employee Andrey Zhorzhes engaged in self-trading, manipulating markets, and acting without any financial purpose. engaged in trading practices that created artificial daily trading volumes.
According to the complaint, these employees sometimes generated trillions of trades and billions of dollars worth of fake trades.
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