SEC Exposes Massive Crypto Market Manipulation Scheme

US authorities, including the Securities and Exchange Commission (SEC), the Federal Bureau of Investigation (FBI) and the Department of Justice (DOJ), have accused Gotbit and four crypto companies of widespread market manipulation .

The charges also involved several individuals who worked for the offending organizations.

Market Makers Accused of Running Wash’s Trading Scheme

According to a statement the SEC issued on October 9, Gotbit, ZM Quant, CLS Global and MyTrade MM used robots to increase trading volumes on centralized exchanges (CEX) through wash trading.

A parallel statement from the US Attorney’s office in Massachusetts listed the popular Saitama and Robo Inu meme coin projects among those that had complaints filed against them.

The SEC alleges that the aforementioned companies engaged in “pump and dump” schemes, where they misrepresented the value of certain tokens, causing new investors to buy only to get paid at inflated prices.

In total, law enforcement seized $25 million in cryptocurrency. In addition, they disabled bots responsible for millions of fraudulent transactions in 60 different crypto assets.

Saitama employees named in complaint

Prominent names that have come up in the investigations include Russell Armand, Maxwell Hernandez and Manpreet Kohli. They and fellow Saitama employees Nam Tran and Vy Pham are accused of using Gotbit and ZM Quant to provide market manipulation services, including generating fake trading volumes for a variety of cryptocurrencies.

Kohli and Tran face additional charges of conspiracy to commit wire fraud and operating an unlicensed money transmission business.

According to the US Attorney’s office, Armand and Hernandez have already pleaded guilty to the exact same charges as those brought against Kohli and Tran. In addition, California-based Pham also confessed to being involved in illegal conduct in Saitama and another unnamed crypto company.

Other defendants in US District Court in Boston include Aleksei Andriunin of Gotbit, Fedor Kedrov and Qawi Jalili, as well as Riqui Liu and Baijun Ou of ZM Quant.

The investigation, which began in 2017, discovered that the suspects used bots to create quadrillion fake transactions, amounting to billions in daily artificial trading volume. These activities caused unsuspecting retail investors to purchase tokens at inflated prices, only to suffer massive losses when Gotbit and its co-defendant companies exited their holdings.

A crucial turning point in the investigation came when the FBI created a cryptocurrency called NexFundAI to access the inner workings of market-making firms.

NexFundAI, which was still actively trading at the time of writing, with a market cap of around $237,000, was designed to appear as a legitimate project linking crypto and AI. It seemed to have worked as intended, attracting market manipulators who believed they could exploit it.

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