The U.S. Attorney’s Office for the District of Massachusetts announced on Wednesday that 18 individuals and entities have been charged with widespread fraud and manipulation in the cryptocurrency markets.
The charges, which were unsealed in Boston, accuse leaders of four cryptocurrency companies and several market makers of engaging in deceptive practices to inflate token prices. The announcement details:
More than $25 million in cryptocurrency has been seized and multiple trading bots responsible for millions of dollars’ worth of wash trades for approximately 60 different cryptocurrencies have been deactivated.
The defendants allegedly created false impressions of trading activity through wash trading and inflated token prices before selling them at those higher values.
As part of its “Operation Token Mirrors,” the Federal Bureau of Investigation (FBI) created a fake cryptocurrency company and token to expose fraud in the crypto market. The token appeared legitimate, allowing investigators to track illegal activities like wash trading and market manipulation. Three market makers — ZM Quant, CLS Global, and Mytrade — along with their employees, were charged with wash trading on behalf of NexFundAI, a cryptocurrency created by law enforcement for the investigation. Gotbit, its CEO, and two directors were also charged for similar fraudulent schemes.
The U.S. Attorney noted: “The defendants are then alleged to have sold their tokens at the artificially inflated prices, a fraud commonly known as a ‘pump and dump.’ The largest of these cryptocurrency companies, Saitama, at one point had a multi-billion-dollar market value.” Acting U.S. Attorney Joshua Levy emphasized the significance of this operation. He stressed:
This investigation, the first of its kind, identified numerous fraudsters in the cryptocurrency industry. Wash trading has long been outlawed in the financial markets, and cryptocurrency is no exception.
Moreover, the U.S. Securities and Exchange Commission (SEC) has filed civil complaints alleging violations of the securities laws in relation to the conduct at Gotbit, CLS, ZM Quant, Saitama, and Robo Inu.
