BOSTON, Oct 9 (Reuters) – Three cryptocurrency firms and 15 individuals have been accused of participating in extensive fraud and market manipulation, following an unprecedented investigation where the FBI created a digital token to assist in uncovering criminal activity.
Federal prosecutors in Boston have charged Gotbit, ZM Quant, CLS Global, along with their executives and staff, in a crackdown that resulted in four arrests, five plea agreements, and the seizure of over $25 million in cryptocurrency.
Acting U.S. Attorney Joshua Levy stated that the defendants orchestrated sham trades to inflate the trading volume of multiple cryptocurrency tokens artificially before selling them off, “leaving innocent investors holding the bag.”
“This case represents a collision between new-age technology—crypto—and an old-school fraud, specifically a ‘pump-and-dump’ scheme, which has existed since the days of the stock market,” Levy told reporters.
As part of the investigation, the FBI set up a cryptocurrency company called NexFundAI, which had its own token on the Ethereum blockchain. Prosecutors allege that ZM Quant, CLS Global, and another entity, MyTrade, agreed to manipulate the token’s value.
Authorities reported that the token was traded, but they closely monitored the situation to minimize the risk of retail investors purchasing it before suspending trading. The U.S. Securities and Exchange Commission also filed related civil cases.
According to prosecutors, Saitama—the largest company involved—once had a market value of $7.5 billion. This valuation followed actions by its leadership, who manipulated the trading of its tokens and covertly sold them.
The company’s chief executive, Manpreet Kohli, was arrested on Monday in the United Kingdom. Additionally, five other current or former employees have been charged, with three already pleading guilty. Among those charged is Aleksei Andriunin, CEO of Gotbit, a cryptocurrency “market maker,” who resided in both Russia and Portugal; he was arrested in Portugal on Tuesday. Two employees from his firm in Russia are also facing charges.
Prosecutors allege that between 2018 and 2024, Gotbit was involved in “wash trading”—a fraudulent practice of fake trading activity—as well as market manipulation on behalf of various cryptocurrency clients, aimed at artificially inflating the trading volume of their tokens.
Also facing charges are four additional individuals who worked at cryptocurrency “market makers,” which prosecutors claim offered market manipulation services to clients. These individuals include Liu Zhou, the founder of MyTrade, a market maker, who has agreed to plead guilty according to court documents; Riqui Liu of the United Kingdom and Hong Kong as well as Baijun Ou of Hong Kong, both of whom worked at ZM Quant; and Andrey Zhorzhes of the United Arab Emirates, an employee of CLS Global. Attempts to reach these individuals for comment were unsuccessful.
Additionally, Michael Thompson of Virginia was charged for his role at cryptocurrency firm VZZN, which was founded by a former Saitama employee. Bradley Beatty of Florida was also charged, with prosecutors accusing him of fraudulently promoting his crypto venture, Lillian Finance.
