Four cryptocurrency companies and 14 individuals were charged in what U.S. prosecutors on Wednesday called the first criminal prosecution of financial services companies for market manipulation and fictitious trading in the cryptocurrency sector.
Federal prosecutors in Boston charged Gotbit, ZM Quant, CLS Global and MyTrade and their leaders and employees in a case that also included charges against people abroad. Five people agreed to plead guilty or had already done so.
Prosecutors accused the defendants of engaging in the cryptocurrency equivalent of stock market “pump and dump” schemes that involve phony trades to artificially inflate trading volume for various cryptocurrency tokens before selling them.
The largest company involved in the various schemes, Saitama, at one point had a market capitalization of $7.5 billion, after its leadership began manipulating the market to secretly acquire and sell its tokens, prosecutors said.
Its CEO Manpreet Kohli was arrested on Monday in the United Kingdom. Five other current or former employees were also charged, three of whom pleaded guilty.
Other defendants include Alexei Andionin, CEO of GotBit, a cryptocurrency market maker who lived in Russia and Portugal. He was charged along with two employees of his company in Russia and could not be reached for comment.
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Prosecutors said that from 2018 to 2024, Gotbit engaged in a form of market manipulation called “wash trading” on behalf of numerous cryptocurrency clients, earning tens of millions of dollars at the expense of investors. In wash trading, a financial asset is bought and sold for the express purpose of misleading the market.
Prosecutors cited a 2019 interview Andionin gave on a YouTube show, in which he detailed how his company developed code to artificially inflate the trading volume of digital currencies for the purposes of listing them on cryptocurrency exchanges.
Three other individuals based abroad who worked as cryptocurrency “market makers” and who prosecutors said provided advertised market manipulation services to clients have also been charged.
They are Liu Zhou, the Chinese founder of MyTrade, who according to court papers has agreed to plead guilty; Baijun Ou from Hong Kong, who worked at ZM Quant, and Andre Zorges from the United Arab Emirates, who worked at CLS Global.
They could not immediately be reached for comment.
Other defendants include 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 said fraudulently promoted his cryptocurrency company, Lillian Finance.
(Reporting by Nate Raymond in Boston; Editing by Leslie Adler and David Gregorio)
