The U.S. Securities and Exchange Commission (SEC), along with the Federal Bureau of Investigation (FBI) and the Department of Justice (DOJ), uncovered a large-scale cryptocurrency market manipulation network and seized over $25 million worth of cryptocurrency. Widespread Cryptocurrency Fraud Scheme Bots carrying out wash trading have been disabled, halting fraudulent activity across the market.
Cryptocurrency market manipulation detected
On October 9, the SEC released a detailed statement outlining the charges against several cryptocurrency companies, including Gotbit, ZM Quant, CLS Global, and MyTrade MM. These companies are accused of using bots to artificially inflate trading volumes and trick investors into buying tokens based on manipulated market data in cryptocurrency fraud schemes.
The scheme primarily involved “wash trading.” This is a fraudulent tactic where bots execute trades to simulate high trading activity, creating the illusion of liquidity and demand for a particular token. According to the SEC, the manipulated tokens included popular meme coins such as Saitama and Robo Inu.
$25 million worth of cryptocurrency seized
U.S. law enforcement seized $25 million worth of cryptocurrency from the accused companies, disabled trading bots responsible for millions of fraudulent transactions, and formally charged several key individuals involved in the cryptocurrency fraud scheme. These bots were responsible for billions of dollars in fake trading volume across 60 different crypto assets.
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Key players in the plan
The investigation involved several individuals, including Saitama employees Russell Armand, Maxwell Hernandez and Manpreet Kohli. These employees reportedly partnered with Gotbit and ZM Quant to facilitate market manipulation efforts in a cryptocurrency fraud scheme.
Kohli and Saitama employee Nam Tran face additional charges of committing wire fraud and operating an unlicensed money transfer business. Armand and Hernandez have already pleaded guilty to similar charges. Other high-profile suspects were also implicated in the investigation. These include Gotbit’s Aleksei Andriunin and Fedor Kedrov, and ZM Quant’s Riqui Liu and Baijun Ou.
Inside Fraud: Bots and Artificial Transactions
Trading bots carried out fraudulent schemes, generating trillions of fake trades and creating artificial daily trading volumes worth billions of dollars. These activities resulted in significant financial losses for individual investors. They unknowingly purchased overvalued tokens, whose value later plummeted when the accused company dumped its holdings at inflated prices as part of a cryptocurrency fraud scheme.
One of the most significant breakthroughs in the investigation came when the FBI created a fake cryptocurrency called NexFundAI, giving the bureau access to market manipulators. Still trading with a modest market cap of around $237,000, NexFundAI appears to be a legitimate AI-connected cryptocurrency project. The decoy successfully lured operators who wanted to exploit it.
SEC cracks down on market manipulation
This case highlights the SEC’s increased crackdown on cryptocurrency market manipulation and fraud. The agency began its investigation in 2017 to uncover the complexities of the cryptocurrency market and how trading bots defrauded investors.
As the regulatory environment for digital assets continues to evolve, the SEC is working closely with other U.S. agencies to protect investors from fraudulent crypto market practices.