3 companies, 15 people indicted for US cryptocurrency fraud

BOSTON, Oct 9 (Reuters) – Three cryptocurrency companies and 15 people have been charged with involvement in massive fraud and market manipulation following an investigation in which the FBI for the first time ordered authorities to create a new digital token to help fight crime. .

Federal prosecutors in Boston charged Gotbit, ZM Quant, CLS Global and leaders and employees of these and other companies in a takedown that led to four arrests, five plea deals and the seizure of more than $25 million. Cryptocurrency

Acting US Attorney Joshua Levy said the defendants “left innocent investors holding the bag” by committing fraud to artificially inflate trading volume before selling various cryptocurrency tokens.

“This is a case where new-age technology, crypto, meets an old-school fraud, in this case a 'pump and dump' scheme, which is as old as the stock market itself,” Levy told reporters.

As part of the investigation, the FBI ordered the creation of a cryptocurrency company, NexFundAI, which had a token on the Ethereum blockchain that prosecutors said ZM Quant, CLS Global and another company, MyTrade, agreed to help manipulate.

The authorities said the token was traded but they carefully monitored it so that retail investors could buy it before deactivating trading to minimize risk. The US Securities and Exchange Commission has also filed a related civil suit.

Prosecutors said Saitama, the largest of the companies involved, at one point had a market value of $7.5 billion, when its leadership began trading its tokens and secretly selling them.

Its chief executive is Manpreet KohliA new tab opensArrested in the UK on Monday. Five other current or former employees were also charged, and three pleaded guilty.

Others are accusedA new tab opens Alexei Andreunin, CEO of Gotbit, a cryptocurrency “market maker” who lived in Russia and Portugal. He was arrested in Portugal on Tuesday. Two employees of his company in Russia have also been charged.

Prosecutors said that from 2018 to 2024, Gotbit engaged in “wash trading,” a fraudulent trading, and market manipulation to help artificially inflate trading volumes for several cryptocurrency clients for their tokens.

Also charged are four other individuals who worked as cryptocurrency “market makers” that prosecutors said advertised market manipulation services to clients.

They are Liu Zhu, founder of market maker Mitrade, who has agreed to plead guilty, according to court papers; Ricky Liu of the UK and Baijun Ou of Hong Kong and Hong Kong, who both worked at ZM Quant; and Andre Georges of the United Arab Emirates, an employee of CLS Global.

They could not immediately be reached for comment.

Others charged are Michael Thompson of Virginia, who worked at a cryptocurrency company called VZZN founded by a former Saitama employee, and Bradley Beatty of Florida, who prosecutors say fraudulently promoted his crypto company Lillian Finance.

Reporting by Nate Raymond in Boston; Edited by Leslie Adler, David Gregorio, and Richard Chang

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Nate Raymond reports on the federal judiciary and litigation. He can be reached at nate.raymond@thomsonreuters.com.

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