US authorities, including the Securities and Exchange Commission (SEC), Federal Bureau of Investigation (FBI), and Department of Justice (DOJ), have charged Gotbit and four other crypto companies with extensive market manipulation.
The charges also implicate several individuals who worked for the offending organizations.
Market Movers Accused of Running Wash Trading Scheme
According to a statement issued by the SEC on October 9, Gotbit, ZM Quant, CLS Global, and MyTrade MM used bots to increase trading volume on centralized exchanges (CEX) through wash trading.
A parallel statement from the Massachusetts U.S. Attorney’s office included popular meme coin projects Saitama and Robo Inu among the projects for which complaints were filed against.
The SEC claims that the companies engaged in a “pump and dump” scheme, in which they misrepresented the value of certain tokens, thereby encouraging new investors to buy only to cash out at inflated prices.
In total, law enforcement officers seized $25 million in cryptocurrency. Additionally, they disabled bots responsible for millions of fraudulent transactions across 60 different crypto assets.
Saitama Employees Named in Complaint
Prominent names involved in this investigation include Russell Armand, Maxwell Hernandez, and Manpreet Kohli. They and fellow Saitama employees Nam Tran and Vy Pham are accused of using Gotbit and ZM Quant to provide market manipulation services, including generating fake trading volumes for various cryptocurrencies.
Kohli and Tran face additional charges of conspiracy to commit wire fraud and operating an unlicensed money transfer business.
According to the US Attorney’s office, Armand and Hernandez have pleaded guilty to the same charges as those leveled against Kohli and Tran. Additionally, California-based Pham also admitted to being involved in unlawful actions at Saitama and other unnamed crypto companies.
Others charged in U.S. District Court in Boston include Gotbit’s Aleksei Andriunin, Fedor Kedrov, and Qawi Jalili, as well as ZM Quant’s Riqui Liu and Baijun Ou.
The investigation, which began in 2017, revealed that the suspects used bots to create fake transactions worth quadrillions, with artificial trading volumes reaching billions each day. This activity led to unsuspecting retail investors purchasing tokens at inflated prices, only to suffer huge losses when Gotbit and the accused companies dumped their holdings.
A key turning point in the investigation occurred when the FBI created a cryptocurrency called NexFundAI to gain access to the workings of market making companies.
NexFundAI, which is still actively trading at the time of this writing, with a market capitalization of around $237,000, is designed to appear as a legitimate project connecting crypto and AI. This seems to be working as it should, attracting market manipulators who believe they can exploit it.
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