By Nate Raymond
BOSTON (Reuters) -Four cryptocurrency companies and 14 people have been charged in what U.S. prosecutors on Wednesday called the first criminal prosecution against financial services companies for market manipulation and false trading in the cryptocurrency sector.
Federal prosecutors in Boston charged the companies Gotbit, ZM Quant, CLS Global and MyTrade and their leaders and employees in a case that also involved charges against people abroad. Five people have agreed to plead guilty or have already done so.
Prosecutors accused the defendants of engaging in the crypto equivalent of stock market “pump and dump” schemes that involved simulated trading to artificially inflate the trading volume of various cryptocurrency tokens before selling them.
Prosecutors said the largest of the companies involved in the various schemes, Saitama, at one point had a market value of $7.5 billion, after its leaders began manipulating the market for its tokens and secretly selling them. .
Its chief executive, Manpreet Kohli, was arrested on Monday in the United Kingdom. Five other current or former employees were also charged and three pleaded guilty.
Other defendants included Aleksei Andiunin, CEO of Gotbit, a cryptocurrency “market maker” who lived in Russia and Portugal. He was charged along with two of his company's employees in Russia and could not be reached for comment.
Prosecutors said that from 2018 to 2024, Gotbit engaged in a form of market manipulation called “wash trading” on behalf of various cryptocurrency clients, earning tens of millions of dollars at the expense of investors. In wash trading, a financial asset is bought and sold with the express purpose of deceiving the market.
Prosecutors cited a 2019 interview Andiunin gave in a YouTube broadcast in which he detailed how his company had developed code to artificially inflate the trading volume of tokens in order to list them on crypto exchanges.
Also charged were three other individuals residing abroad who worked at cryptocurrency “market makers” that prosecutors said advertised market manipulation services to clients.
This is Liue Zhou, the Chinese founder of MyTrade, who, according to court documents, agreed to plead guilty; Baijun Ou from Hong Kong, who worked at ZM Quant, and Andrey Zhorzhes from the United Arab Emirates, an employee at CLS Global.
<img src="https://technicalterrence.com/wp-content/uploads/2024/10/The-United-States-charges-18-people-and-companies-with-cryptocurrency.jpg" title="© Reuters. FILE PHOTO: Tokens representing the cryptocurrencies bitcoin and ether are submerged in water in this illustration taken May 17, 2022. REUTERS/Dado Ruvic//File Photo” alt=”© Reuters. FILE PHOTO: Tokens representing the cryptocurrencies bitcoin and ether are submerged in water in this illustration taken May 17, 2022. REUTERS/Dado Ruvic//File Photo” rel=”external-image”/>
They could not immediately be reached for comment.
Other defendants were Michael Thompson of Virginia, who worked at a cryptocurrency company called VVZZN founded by a former Saitama employee, and Bradley Beatty of Florida, who prosecutors say fraudulently promoted his cryptocurrency company, Lillian Finance.
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