18 Companies and Individuals Face Charges Related to Alleged Fraud and Manipulation in Cryptocurrency Markets

The charges, which were unsealed in Boston, concern the leaders of four cryptocurrency companies, four cryptocurrency financial services firms known as “market makers” and employees of those firms.

Federal prosecutors in Boston have charged 18 companies and individuals with fraud and manipulation in cryptocurrency markets, and four defendants have pleaded guilty, another has agreed to plead guilty and three others were apprehended by authorities this week, the U.S. Attorney’s Office, District of Massachusetts, announced Wednesday (Oct. 9).

The four cryptocurrency companies whose leaders are charged are Saitama, Robo Inu, VZZN and Lillian Finance, according to the press release. The four cryptocurrency financial services firms are known as “market makers.”

The charging documents allege that the defendants who created the cryptocurrency companies made their tokens look like good investments by executing sham trades in the tokens (“wash trades”) and making false statements about the tokens, per the release.

The market makers — ZM Quant, CLS Global, MyTrade MM and Gotbit — are charged with wash trading and/or conspiring to do so, according to the release.

“Wash trading has long been outlawed in the financial markets, and cryptocurrency is no exception,” Acting U.S. Attorney Joshua Levy said in the release. “These are cases where an innovative technology — cryptocurrency — met a century-old scheme — the pump and dump. The message today is, if you make false statements to trick investors, that’s fraud. Period.”

In a pump-and-dump scheme, a manipulator spreads rumors, a spate of buys drives prices up, and then the manipulator sells, causing the price to crash, PYMNTS reported in an August 2022 overview of crypto market manipulation.

In wash trading, a person or a group buys and resells a token for progressively higher prices before dumping it, according to the report.

As part of the government’s investigation, the FBI created a cryptocurrency company and token, per the Wednesday press release.

“The FBI took the unprecedented step of creating its very own cryptocurrency token and company to identify, disrupt and bring these alleged fraudsters to justice,” Jodi Cohen, special agent in charge of the FBI, Boston Division, said in the release.

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