Isabella García
U.S. prosecutors have charged four cryptocurrency companies and 14 individuals in a significant move against market manipulation and fraudulent trading activities. The companies involved are Gotbit, ZM Quant, CLS Global, and MyTrade, along with their leadership and employees. Some arrests have also been made internationally, according to Reuters.
This action by the U.S. Justice Department marks a notable step in their broader crackdown on the crypto industry, which has previously targeted major players like Binance. It is being described as the first criminal prosecution of financial services firms in the crypto space related to market manipulation and sham trading practices.
Four of the defendants have agreed to plead guilty, and over $25 million in cryptocurrency has been seized as part of the investigation, as confirmed by the U.S. Attorney’s Office for the District of Massachusetts.
Details of the Alleged Scheme
Prosecutors allege that the defendants created fraudulent crypto firms and misrepresented their tokens to investors. Through wash trading—where they bought and sold their own tokens to simulate active market activity—they created the illusion that these tokens were valuable investments. This artificially inflated the price of the tokens, allowing the defendants to sell their holdings at higher prices.
The charged companies allegedly hired market makers like ZM Quant, Gotbit, CLS Global, and MyTrade to execute wash trades in exchange for payment. These activities were central to misleading investors about the true value of the tokens.
“These cases involve an innovative technology—cryptocurrency—being used in a classic pump-and-dump scheme,” said acting U.S. Attorney Joshua Levy. “The message is clear: fraudulent behavior that deceives investors, whether in traditional markets or the crypto space, will not be tolerated.”
FBI’s Role in the Investigation
The FBI played a crucial role in the investigation, taking the unique step of creating its own cryptocurrency token, NexFundAI, to uncover fraudulent activities in the market. “The FBI created its very own crypto to identify, disrupt, and bring these fraudsters to justice,” said Jodi Cohen, special agent in charge of the FBI’s Boston Division.
Civil Charges by the SEC
In addition to the criminal charges, the U.S. Securities and Exchange Commission (SEC) has filed civil charges against ZM Quant, Gotbit, CLS Global, and nine individuals. The SEC alleges that key figures, including Russell Armand, Maxwell Hernandez, Manpreet Singh Kohli, Nam Tran, and Vy Pham, were promoters who hired ZM Quant and Gotbit to manipulate trading volume and prices of cryptocurrencies offered to retail investors.
The SEC also named ZM Quant employees Baijun Ou and Ruiqi Lau, Gotbit’s Fedor Kedrov, and CLS Global’s Andrey Zhorzhes as participants in wash trading on popular crypto trading platforms.
“These enforcement actions highlight the ongoing risks retail investors face from fraudulent schemes involving crypto assets,” said Sanjay Wadhwa, deputy director of the SEC’s Division of Enforcement. “Investors should be wary that in some cases, the odds are unfairly stacked against them.”
The SEC is seeking permanent injunctions, the return of ill-gotten gains, and bans preventing the defendants from serving as officers or directors in the future.
