US Authorities Charge Gotbit and 4 Other Crypto Firms With Widespread Market Manipulation

U.S. authorities, including the Securities and Exchange Commission (SEC), the Federal Bureau of Investigation (FBI), and the Department of Justice (DOJ), have charged Gotbit and four other crypto firms with widespread market manipulation.

Five crypto market makers, including Gotbit, and several individuals have been charged by U.S. authorities with manipulating the cryptocurrency market in a massive scheme.

The Securities and Exchange Commission (SEC), the Federal Bureau of Investigation (FBI), and the Department of Justice (DOJ) announced the charges on Monday.

The SEC alleges that Gotbit, ZM Quant, CLS Global, and MyTrade MM used bots to inflate trading volumes on centralized exchanges (CEXs) through wash trading. The practice involves an entity simultaneously buying and selling the same asset to create artificial trading activity.

According to the SEC, the companies engaged in “pump and dump” schemes, where they misrepresented the value of certain tokens, such as the meme coin projects Saitama and Robo Inu, to attract new investors.

The investors were then enticed to buy into the tokens at inflated prices, allowing the market makers to cash out and generate substantial profits.

“We allege that Gotbit and ZM Quant operated in the shadows to manipulate the cryptocurrency market, creating the illusion of liquidity and volume,” said Sanjay Wadhwa, Deputy Director of the SEC’s Division of Enforcement.

“Their conduct misled investors and pumped up the value of crypto tokens, ultimately leading to a massive crypto scheme that defrauded investors.”

In total, law enforcement officials seized $25 million in cryptocurrency, which is believed to be proceeds from the illegal activities.

Additionally, they deactivated bots that were responsible for millions of fraudulent transactions across 60 different crypto assets.

Several individuals who worked for the offending organizations were also charged.

Saitama employees Russell Armand, Maxwell Hernandez, and Manpreet Kohli are accused of using Gotbit and ZM Quant to provide market manipulation services, including generating fake trading volumes for cryptocurrencies.

Kohli and Tran face additional charges of conspiracy to commit wire fraud and running an unlicensed money-transmitting business.

According to the U.S. Attorney’s office, Armand and Hernandez have already pleaded guilty to the exact charges as those leveled against Kohli and Tran.

Moreover, California-based Pham also confessed to being involved in unlawful conduct at Saitama and another un-named crypto company.

Others indicted in the U.S. District Court in Boston include Gotbit’s Aleksei Andriunin, Fedor Kedrov, and Qawi Jalili, as well as Riqui Liu and Baijun Ou of ZM Quant.

The investigation, which began in 2017, uncovered that the suspects used bots to create quadrillions of fake transactions, which amounted to billions in artificial trading volume daily.

These activities caused unsuspecting retail investors to buy tokens at inflated prices, only to suffer massive losses when Gotbit and its co-accused firms dumped their holdings.

A crucial turning point in the investigation came when the FBI created a cryptocurrency called NexFundAI to gain access to the inner workings of the market-making firms.

NexFundAI, which was still actively trading at the time of this writing, with a market cap of around $237,000, was designed to appear as a legitimate project that linked crypto and AI.

It seemed to have worked as intended, attracting the market manipulators who believed they could exploit it.

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