US authorities have announced a litany of charges against a series of companies and at least eighteen individuals in relation to market manipulation of cryptocurrencies. Among those accused are crypto companies and their market makers, including market makers specialising in memecoin projects. The charges include fraud, conspiracy to commit market manipulation, wire fraud, conspiracy to commit money laundering and conducting an unlicensed money transmitting business. Some of these offences can attract sentences of up to 20 years in prison.
The case has the potential to have wide-ranging implications for the cryptocurrency industry and appears to be the first-ever attempt by US authorities to tackle wash trading and other pump and dump practices in the crypto space in order to protect unknowing retail consumers. Aside from the US Ministry of Justice, Federal Bureau of Investigation, Internal Revenue Service and Securities and Exchange Commission, authorities in Spain, the UK and Portugal collaborated on the investigation and arrests.
Memecoins in particular have seen a surge of popularity in the space in 2024, and while seasoned crypto investors are likely to be well aware of the risks involved in meme investments, evidence presented in the various cases could prove the presence of bad actors and shady business practices in the crypto space.
Charges and complaints brought by US MOJ, SEC; FBI involved
The US Ministry of Justice has charged various firms and individuals with making false statements about crypto tokens, executing sham wash trades, selling tokens at inflated values and other deceptive tokens. This includes employees of market making firms Gotbit, ZM Quant, CLS Global and MyTrade. So far, Reuters reports that five people have already agreed to plead guilty, with numerous arrests made and millions of dollars worth of cryptocurrency seized.
In an unprecedented and stunning twist, it has been revealed that part of the operation involved the FBI creating its own crypto token on Ethereum, NexFundAI, with ZM Quant and CLS Global agreeing to manipulate that token's price.
The US Securities and Exchange Commission has also filed civil suits against three companies and nine individuals in relation to alleged violations of securities laws by Gotbit, CLS Global, ZM Quant and Saitama.
Who has been charged?
The leaders of crypto projects Robo Inu, VZZN, Lillian Finance and Saitama have also been charged. The CEO of Saitama, Manpreet Kohli, was arrested in the UK, with five other employees and former employees also charged, in connection with using Gotbit’s market making services to manipulate the price of its token STC, which suffered a catastrophic drop as the news came out.
Market maker Gotbit’s CEO Aleksei Andreiunin was also arrested this week, with two of his employees in Russia also charged. It is alleged that for the past six years Gotbit has been wash trading its clients’ tokens to create artificial volume in their markets, thereby stimulating price action. UAE market maker CLS Global and employees of Hong Kong market maker ZM Quant have also been charged for advertising market manipulation services.
At this stage, all claims made are only allegations and all defendants are presumed to be innocent until proven guilty in a court of law, a burden which the charging authorities will have to discharge to secure any convictions.
We will continue to monitor the case.
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