In a landmark case, federal authorities have charged 18 individuals and four cryptocurrency firms in a sweeping crackdown on market manipulation schemes, marking the first major enforcement action of its kind within the digital asset industry. The U.S. Department of Justice seized over $25 million in cryptocurrency as part of “Operation Token Mirrors,” a first-of-its-kind sting operation that saw the FBI create a fictional token, NexFundAI, to expose fraudulent practices.
The firms involved—Gotbit, ZM Quant, CLS Global, and MyTrade—are accused of engaging in “wash trading,” an illegal tactic where fake trading activity is generated to artificially inflate token prices. This practice, designed to lure in unsuspecting investors, is at the heart of a classic “pump and dump” scheme.
After inflating the value of various tokens, including the Saitama token, which at one point reached a staggering $7.5 billion market cap, the perpetrators allegedly sold off their holdings for massive profits, leaving investors with worthless assets.
“This case highlights how an innovative technology like cryptocurrency was exploited using century-old fraud schemes,” said Acting U.S. Attorney Joshua Levy, underscoring that cryptocurrency is no exception to the laws governing market integrity. Special Agent Jodi Cohen, leading the FBI’s Boston Division, noted that the bureau’s creation of NexFundAI allowed them to infiltrate these illegal networks and bring alleged fraudsters to justice.
Among those charged is Aleksei Andriunin, the 26-year-old CEO of Gotbit, who has been arrested in Portugal and awaits extradition to the U.S. Andriunin had previously boasted about building a business based on faking trade volumes for cryptocurrency exchanges. His firm, along with ZM Quant and others, allegedly used a series of coordinated trades and multiple wallets to conceal the true nature of their activity, misleading investors into believing the tokens were actively traded and in high demand.
In addition to market manipulation, the conspirators are accused of making false claims about the tokens they promoted. Prosecutors revealed that over 60 digital tokens were affected by these schemes, with several defendants already pleading guilty or preparing to do so. The fraudulent activity not only eroded trust in the digital asset space but also highlighted the risks that come with investing in a largely unregulated market.
As the case unfolds, authorities have moved swiftly to dismantle the operations, shutting down trading bots responsible for millions in fake trades and freezing assets tied to the scheme. Those involved face serious charges, including market manipulation and wire fraud, carrying potential sentences of up to 20 years in prison.
"This prosecution sends a clear message: market manipulation will not be tolerated in any asset class, including cryptocurrency," Levy stated. The case serves as a stark reminder of the importance of due diligence and regulatory oversight in the rapidly growing digital asset industry.