On October 9, three major U.S. agencies— the Federal Bureau of Investigation (FBI), the Department of Justice (DOJ), and the U.S. Securities and Exchange Commission (SEC)—announced a joint investigation aimed at dismantling a network involved in manipulating the cryptocurrency market. The investigation, named Operation Token Mirrors, initiated by the FBI, uncovered the involvement of 18 individuals and organizations, leading to the seizure of over $25 million in cryptocurrency assets.
The "Pump and Dump" Scheme
The FBI used the approach of creating a fake cryptocurrency project named NexFundAI to infiltrate the fraud network. Companies such as ZM Quant, CLS Global, and MyTrade were accused of engaging in price manipulation through a "pump and dump" scheme, creating fake trading volumes to inflate token values and mislead investors. One notable project, Saitama, once reached a market capitalization of $7.5 billion, though much of its value was derived from fake transactions executed by automated trading bots.
Wash Trading and Market Manipulation
Companies like Gotbit Consulting were accused of conducting wash trading to create a false impression of market interest. Automated trading bots were used to perform millions of trades daily, generating fake liquidity and trading volume. MyTrade even offered services allowing customers to manage the number of daily wash trades, optimizing activities to evade detection by regulatory authorities.
Involved Individuals and Entities
Vy Pham, a Vietnamese citizen residing in California, was accused of promoting projects like Saitama and Robo Inu, along with charges such as unregistered securities offerings and securities fraud. Gotbit's CEO, Aleksei Andriunin, was arrested in Portugal and is awaiting extradition to the U.S. Other individuals, such as Fedor Kedrov and Qawi Jalili, could face up to 20 years in prison and fines of $5 million.
Long-Term Impact
The investigation not only targeted the prosecution of individuals but also highlighted the need for stricter regulations to protect investors. The joint involvement of the FBI, DOJ, and SEC sent a strong message of the authorities' determination to combat fraudulent activities and maintain transparency in the market. The U.S. House of Representatives also passed a cryptocurrency regulation law in May 2024, aiming to establish a clearer legal framework for the industry.
Message from Authorities
Joshua Levy, acting U.S. Attorney in Boston, emphasized, "Even though cryptocurrency is a new technology, if it's used to defraud investors, it's still fraud." This crackdown marks a significant step in monitoring the digital asset market, contributing to a safer investment environment.
