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Federal prosecutors filed charges of sham trading and market manipulation against three crypto companies and their employees.
Gotbit, ZM Quant, CLS Global, and 15 individuals face serious allegations.
Extensive Evidence of Crypto Manipulation
According to Reuters, federal prosecutors created a sham token to enlist the defendants in manipulating its value. Specifically, this is the first instance in which the FBI created a crypto token to investigate and levy manipulation charges against financial service firms.
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Famous meme market maker Gotbit was targeted alongside trading service providers CLS Global and ZM Quant. The prosecutors claimed extensive evidence of these fraudulent operations. For example, the full text of one set of charges quotes at length from a teleconference of ZM Quant leaders:
“We will use our wallets to do the trading maybe ten times per minute or twenty times a minute to…increase the trading volume. When we hit top gainer on Uniswap, the users will come to trade, they’ll see the opportunities and chase the price. That’s how we do market making,” claimed Riuqi “Ricky Lau” Liu, a ZM Quant executive.
This recording is just one example of the defendants describing their schemes in clear and straightforward language. Clearly, with evidence this damning, it’s little wonder that five defendants already plead guilty. This has resulted in four arrests and the seizure of over $25 million in crypto.
This type of extensive proof is not limited to the ZM Quant case; multiple filings include similarly frank evidence.
The evidence against Gotbit also includes a 2019 YouTube interview with CEO Aleksei Andriunin, in which he explicitly described artificially inflating trade volumes for new tokens. Finally, the authorities arrested Andriunin in Portugal on Tuesday.
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From here, it’s tough to say what exactly law enforcement’s next move will be. These cases might serve as a prelude to an even broader crackdown on crypto market manipulation, or they could serve as a high-profile warning to discourage future offenses.