Eighteen individuals and entities have been charged for widespread fraud and manipulation in the cryptocurrency markets. The U.S. Attorney's Office in Boston announced charges against four cryptocurrency companies, four cryptocurrency financial services firms (i.e., "market makers"), and their employees.
Four defendants have pleaded guilty, another defendant has agreed to plead guilty, and three more defendants were arrested this week in Texas, the United Kingdom, and Portugal. Over $25 million in cryptocurrency has been seized, and multiple trading bots responsible for millions of dollars' worth of "wash trading" across hundreds of cryptocurrencies have been shut down.
According to the indictments, the defendants created cryptocurrency companies and made false representations about their cryptocurrencies ("tokens"), and engaged in sham trading ("wash trading") to create the false appearance of trading activity, in order to make the tokens appear to be good investment choices. These deceptive tactics allegedly attracted new investors and purchasers, causing the token prices to rise. The defendants then allegedly sold their tokens at the artificially inflated prices, a practice known as "pump and dump." One of the largest cryptocurrency companies, Saitama, had a market capitalization that once reached billions of dollars.
The cryptocurrency companies also hired financial services firms ("market makers") to conduct wash trading in exchange for compensation. As described by one market maker defendant who has agreed to plead guilty, the "target in the secondary market" was to find "other buyers from the community, people you don't know or don't care about," because "we have to make [those other buyers] lose money in order to profit."
Three market makers - ZM Quant, CLS Global, and MyTrade, and their employees - are charged with conducting or conspiring to conduct wash trading on behalf of a cryptocurrency company, NexFundAI, created by law enforcement for investigative purposes. The fourth market maker, Gotbit, its CEO, and two directors are also charged with implementing similar schemes.
"This investigation is the first of its kind, identifying widespread fraud in the cryptocurrency industry. Wash trading has long been prohibited in financial markets, and the cryptocurrency markets are no exception. These cases demonstrate that when an innovative technology - cryptocurrencies - intersects with an age-old fraud - pump-and-dump schemes - it is still fraud. The message today is: if you lie to investors, it's fraud. Our office will aggressively pursue fraud, including in the cryptocurrency industry," said Acting U.S. Attorney Joshua Levy. "These charges also serve as a warning to online investors to be vigilant and do their homework before venturing into the digital frontier. People considering investing in the cryptocurrency industry should understand how these scams work in order to protect themselves."
"The FBI has uncovered a new variant of traditional financial crime in this case. Operation Token Mirrors targeted the developers, promoters, and market makers of illicit tokens in the cryptocurrency space. The criminal conduct we have exposed has led to the indictment of the leadership of four cryptocurrency companies, four cryptocurrency 'market makers' and their employees, who are alleged to have orchestrated a complex trading scheme to defraud legitimate investors, causing millions in losses," said FBI Boston Division Special Agent in Charge Jodi Cohen. "The FBI took the unprecedented step of creating its own cryptocurrency token and company to identify, disrupt, and hold these alleged fraudsters accountable."
The U.S. Securities and Exchange Commission (SEC) has filed civil actions against Gotbit, CLS, ZM Quant, Saitama, and Robo Inu related to their conduct, alleging violations of securities laws. Significant assistance in the investigation was provided by the FBI's Legal Attaché Offices (Madrid and London), the Polícia Judiciária of Portugal, the European Network of Fugitive Active Search Teams (ENFAST), the National Extradition Unit of the National Crime Agency of the United Kingdom, the IRS Criminal Investigation Boston Field Office, and the National Cryptocurrency Enforcement Team of the Criminal Division.
The announcement was made by Acting U.S. Attorney Joshua S. Levy and FBI Boston Division Special Agent in Charge Jodi Cohen. The cases are being prosecuted by Assistant U.S. Attorneys Christopher J. Markham and David M. Holcomb of the Securities, Financial, and Cyber Fraud Unit.
The details contained in the charging documents are allegations. The defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.
The following individuals and entities have been charged in the U.S. District Court for the District of Massachusetts:
Aleksei Andriunin, Fedor Kedrov, Qawi Jalili, Gotbit Consulting LLC (Gotbit) - According to court documents, Gotbit was a prominent "market maker" in the cryptocurrency industry. Aleksei Andriunin (26, Russia and Portugal) is the CEO and founder of Gotbit. Andriunin was arrested in Portugal on October 8, 2024 and is awaiting extradition. Fedor Kedrov (Russia) is the head trader at Gotbit. Qawi Jalili (Russia) is the head of sales at Gotbit. Gotbit, Kedrov, and Jalili are charged with wire fraud, conspiracy to commit market manipulation, and wire fraud. Andriunin is also separately charged in a criminal indictment with wire fraud, conspiracy to commit market manipulation, wire fraud, and conspiracy to commit money laundering. As alleged, from 2018 to 2024, Gotbit provided market manipulation and wash trading services to multiple cryptocurrency companies, including U.S.-based companies. Gotbit is alleged to have conducted wash trades worth millions of dollars on behalf of clients and earned tens of millions of dollars from these illicit services. In a 2019 online interview, Andriunin described how he developed code for wash trading to artificially increase the trading volume of cryptocurrencies. Andriunin allegedly kept spreadsheets documenting Gotbit's market manipulation activities, including comparing the "fake trading volume" generated through wash trading to the "real market volume." Gotbit employees, including Jalili and Kedrov, are alleged to have pitched these wash trading strategies and how to avoid detection by regulators to potential clients. Jalili and Kedrov also provided these services for multiple cryptocurrencies, including Saitama and Robo Inu.
Riqui Liu, Baijun Ou, ZM Quant Investment LTD (ZM Quant) - ZM Quant was a "market maker" in the cryptocurrency industry that allegedly offered illegal market manipulation services to clients. Riqui Liu (26, UK and Hong Kong) was an employee of ZM Quant. Baijun Ou (32, Hong Kong) was also an employee of ZM Quant. ZM Quant, Liu, and Ou are charged in a superseding indictment with wire fraud and conspiracy to commit market manipulation and wire fraud.
According to court documents, ZM Quant allegedly promoted a "trading bot" that could "manufacture trading volume." ZM Quant employees are alleged to have discussed these illegal services with clients via Telegram messages and video conferences. For example, the indictment alleges that in a March 2024 video call, Liu and Ou detailed how ZM Quant could trade "maybe ten times or twenty times per minute" to "increase the trading volume" and "push up the price." Liu and Ou also described how ZM Quant used multiple trading wallets to make the trading appear "less artificial." ZM Quant is also alleged to have provided market manipulation services to multiple cryptocurrency companies, including Saitama and NexFundAI.
Andrey Zhorzhes, CLS Global FZC, LLC (CLS) - CLS was a "market maker" in the cryptocurrency industry that allegedly offered illegal market manipulation services to clients. Andrey Zhorzhes, from the United Arab Emirates, was an employee of CLS. CLS and Zhorzhes are charged with wire fraud and conspiracy to commit market manipulation and wire fraud.
As alleged, Zhorzhes described to potential clients how CLS's algorithms could generate trading volume across multiple cryptocurrency exchanges, stating:
• "We have an algorithm... basically self-trading, buying and selling."
• "The idea of generating trading volume is... to make the Token look organic, real, and get people interested in trading."
• "This is very hard to track... we've done this for many clients."
• "I know this is wash trading, and I know people may not be happy about it."
Zhorzhes and other CLS traders are alleged to have provided these market manipulation services to NexFundAI.
Liu Zhou, MyTrade MM - MyTrade MM is another "market maker" in the cryptocurrency industry, alleged to have provided illegal market manipulation services to clients, including "pump and dump" advisory services and "wash trading" conducted by "bots". Liu Zhou (39, Chinese and Canadian citizen) is the founder of MyTrade MM. Liu Zhou has been charged and agreed to plead guilty to conspiracy to commit market manipulation and wire fraud.
MyTrade MM's clients can access these services through a dashboard on the MyTrade MM website, where they can specify the daily wash trading volume required in designated Bit exchanges. MyTrade MM's dashboard describes this service as "trading volume support" and allows for millions of wash trades per day for each client's Bit currency.
In a conversation with an alleged promoter of NexFundAI, Liu Zhou claimed to describe MyTrade MM as superior to "CLS" and "Gotbit" because those market makers "keep clients in the dark" and "control the pump and dump", meaning "they can easily engage in insider trading". Liu Zhou is also alleged to have described various purposes of wash trading, including showing "continuous trading activity every hour", generating sufficient trading volume to get Bit exchanges to waive listing fees, and implementing "pump and dump" schemes. According to court documents, Liu Zhou further described that the "target in the secondary market" is to find "other buyers from the community, people you don't know or don't care about", because "we have to make [those other buyers] lose money in order to profit".
Manpreet Kohli, Haroon Mohsini, Nam Tran, Max Hernandez, Russell Armand, Vy Pham, Saitama LLC (Saitama) - Saitama is a Bit currency company, initially incorporated in Massachusetts in August 2021.
Manpreet Kohli, 43, from the UK, is the CEO of Saitama. Kohli was arrested in the UK on October 7, 2024 and is awaiting extradition. Haroon Mohsini, 37, from Texas, also worked at Saitama. Mohsini was arrested in the Southern District of Texas on October 7, 2024. Nam Tran, 32, from Vietnam, worked at Saitama and is currently in Vietnam. Kohli, Mohsini and Tran are all charged in a superseding indictment with wire fraud, market manipulation, and conspiracy to commit wire fraud, market manipulation, and unlicensed money transmission. Max Hernandez, 36, from Massachusetts, and Russell Armand, 42, from Texas, also worked at Saitama and have been separately charged and have pleaded guilty to market manipulation, conspiracy to commit wire fraud, and unlicensed money transmission. Vy Pham, 32, from California, has also been charged in connection with conduct at another Bit currency company, but has admitted to certain conduct related to Saitama in a plea agreement.
Saitama is alleged to have claimed it would create a suite of products that could be used in conjunction with its Token, and at its peak, claimed a market capitalization of $7.5 billion. Saitama's leadership made various false public statements, including that its business plan had been reviewed by regulatory authorities, that its leadership had not sold their own Saitama Tokens, and that Saitama Token's code design could prevent market manipulation. According to the indictment, Saitama's leadership was in fact actively manipulating the Saitama Token market and secretly selling their Saitama Tokens, profiting tens of millions of dollars.
Saitama's market manipulation activities began around July 2021, when its leadership coordinated a series of small buy transactions spread across multiple Bit wallets. These transactions were coordinated via Telegram, with Armand explaining the purpose was to "create the illusion of a lot of buying and new holders" in order to "stimulate people to buy more... we want these small buy orders to look like more buyers. That's the plan." Saitama's leadership confirmed these buy activities amongst themselves and discussed how to successfully induce others to purchase Saitama Bit currency, exchanging "PUMP IT" emojis and GIFs along the way:
Subsequently, Saitama's leadership paid fees to multiple market makers to conduct wash trading of the Saitama Bit currency on exchanges including BitMart, LBank, and XT.com. The alleged market makers paid by Saitama include ZM Quant and Gotbit.
Robo Inu Finance (Robo Inu) - Robo Inu is a Bit currency company founded by Vy Pham after leaving Saitama in 2021. Pham has been charged and agreed to plead guilty to conspiracy to commit market manipulation, conspiracy to commit wire fraud, and unlicensed money transmission. Pham incorporated and promoted Robo Inu in the US. Similar to Saitama, Robo Inu claimed it would create a suite of products to be used in conjunction with its Bit currency. Around 2022, Robo Inu paid fees to Gotbit to artificially inflate the trading volume of the Robo Inu Token through wash trading on exchanges like BitMart.
Michael Thompson, VZZN - VZZN is a Bit currency company founded by Armand after leaving Saitama in 2023. Michael Thompson, 50, from Virginia, also worked at VZZN. Like Armand, Thompson has been charged and pleaded guilty to conspiracy to commit market manipulation. VZZN is alleged to have claimed to be a video streaming service that could be used in conjunction with the VZZN Token. In promoting this service, Armand and Thompson also made misleading public statements about VZZN and artificially inflated the trading volume of the VZZN Token through wash trading.
Bradley Beatty, Lillian Finance LLC (Lillian Finance) - Lillian Finance is a Bit currency company founded by 48-year-old Florida resident Bradley Beatty. Beatty has been charged with wire fraud. Lillian Finance is alleged to have claimed to use blockchain technology for the healthcare industry and to direct a portion of Token sale proceeds to charity. Beatty made a series of false statements to attract investors, such as claiming he was a defense contractor and had testified before Congress on Bit currency issues. Beatty then obtained hundreds of thousands of dollars in proceeds from retail sales of Lillian Finance Tokens and misappropriated portions of Lillian Finance's profits that were supposed to be used for charity.
The maximum sentence for market manipulation is 20 years imprisonment, up to 3 years supervised release, a fine of up to $5 million or twice the gross gain or loss, and forfeiture of illicit proceeds. The maximum sentence for wire fraud is 20 years imprisonment, up to 3 years supervised release, a fine of up to $250,000 or twice the gross gain or loss, and forfeiture of illicit proceeds and restitution. The maximum sentence for conspiracy to commit wire fraud, market manipulation, and/or unlicensed money transmission is 5 years imprisonment, up to 3 years supervised release, a fine of up to $250,000 or twice the gross gain or loss, and forfeiture of illicit proceeds and restitution. The maximum sentence for conspiracy to commit money laundering is 20 years imprisonment, up to 3 years supervised release, a fine of up to $500,000 or twice the value of the property involved, whichever is greater, and forfeiture of illicit proceeds. Sentences are determined by the federal district court judge based on the U.S. Sentencing Guidelines and applicable laws.
