The U.S. Securities and Exchange Commission (SEC), alongside the Federal Bureau of Investigation (FBI) and Department of Justice (DOJ), has exposed a vast crypto market manipulation network, leading to the seizure of over $25 million in cryptocurrency. Bots running a widespread Crypto Fraud Scheme wash trading were deactivated, halting fraudulent activities across the market.
Crypto Market Manipulation Uncovered
On October 9, the SEC released a detailed statement outlining the charges against multiple crypto firms, including Gotbit, ZM Quant, CLS Global, and MyTrade MM. These companies are accused of artificially inflating trading volumes using bots, deceiving investors into buying tokens based on manipulated market data in their Crypto Fraud Scheme.
The scheme primarily involved “wash trading,” a fraudulent tactic in which bots executed trades to simulate high trading activity, giving the illusion of liquidity and demand for certain tokens. According to the SEC, the manipulated tokens included popular meme coins like Saitama and Robo Inu.
$25 Million in Crypto Seized
U.S. law enforcement confiscated $25 million worth of cryptocurrencies from the accused firms, deactivated the trading bots responsible for millions of fraudulent transactions, and filed formal charges against several key figures linked to the Crypto Fraud Scheme. These bots were responsible for billions in fake trading volume across 60 different crypto assets.
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Key Players in the Scheme
The investigation named several individuals, including Saitama employees Russell Armand, Maxwell Hernandez, and Manpreet Kohli. These employees allegedly partnered with Gotbit and ZM Quant to facilitate their market manipulation efforts in the Crypto Fraud Scheme.
Kohli and Saitama employee Nam Tran face additional charges of conspiracy to commit wire fraud and operating an unlicensed money-transmitting business. Armand and Hernandez have already pleaded guilty to similar charges. The investigation also implicated other high-profile suspects. These include Aleksei Andriunin and Fedor Kedrov from Gotbit, as well as Riqui Liu and Baijun Ou from ZM Quant.
Inside the Fraud: Bots and Artificial Trades
Trading bots executed the fraudulent scheme, creating quadrillions of fake transactions and billions in artificial daily trading volume. These activities caused massive financial losses for retail investors. They unknowingly bought overvalued tokens, which later plummeted in value when the accused firms dumped their holdings at inflated prices as part of the crypto fraud scheme.
One of the most crucial breakthroughs in the investigation came when the FBI created a fake cryptocurrency called NexFundAI, giving the bureau inside access to the market manipulators. NexFundAI, still trading with a modest market cap of around $237,000, appeared as a legitimate AI-linked crypto project. The bait successfully attracted the manipulators, who attempted to exploit it.
SEC’s Crackdown on Market Manipulation
This case highlights the SEC’s growing crackdown on crypto market manipulation and fraudulent activities in the space. The agency began its investigation in 2017, uncovering the complexities of the crypto market and how trading bots deceived investors.
As the regulatory landscape around digital assets continues to evolve, the SEC is working closely with other U.S. agencies to ensure the protection of investors from Crypto Fraud Scheme market practices.