Federal authorities have accused 14 people and four cryptocurrency businesses in a landmark case of devising complex schemes to manipulate markets.
Federal authorities have accused 14 people and four cryptocurrency businesses in a landmark case of devising complex schemes to manipulate markets. It is the first such enforcement action within the digital-asset industry.
The U.S. Department of Justice seized more than $25 million in cryptocurrency and conducted a first-of-its-kind sting operation involving a fictional digital token to capture alleged perpetrators.
Gotbit, ZM Quant, CLS Global, and MyTrade allegedly engaged in "wash trading," where entities create fake trading activity to artificially pump up the prices of tokens and attract unsuspecting investors so that the operators could then turn around and sell their holdings in classic "pump and dump" schemes.
"These are cases where an innovative technology—cryptocurrency—met a century-old scheme—the pump and dump," said Acting U.S. Attorney Joshua Levy.
At the center of the probe, tagged "Operation Token Mirrors," was an FBI-generated cryptocurrency called NexFundAI.
Prosecutors say that ZM Quant, CLS Global, and MyTrade either manipulated or conspired to manipulate the trading volumes of this token to make it appear more attractive to potential investors.
Charges have also been laid against the 26-year-old CEO of Gotbit, Aleksei Andriunin, arrested in Portugal and awaiting extradition to the United States. Most notably, in 2019, Andriunin bragged about "making a business of faking trade volumes at crypto exchanges." Similar manipulative practices seem to be what his company—which sold itself as a hedge fund and meme coin market maker, born from Russian heritage—is accused of.
The case also invokes Saitama, a crypto project that allegedly manipulated its token to reach a market capitalization of $7.5 billion, all while its operators secretly sold their holdings for tens of millions in profits.
"Wash trading has long been forbidden in the financial markets, and cryptocurrency is no exception," said Levy, highlighting how the regulator remains committed to maintaining market integrity "across all asset classes." The SEC is seeking permanent injunctions against Gotbit, Andriunin, and those working for him, along with disgorgement of all illegal profits accrued through the scheme.
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