US federal prosecutors have charged multiple cryptocurrency companies, including Gotbit and ZM Quant, with market manipulation and fraud.
They have also targeted a total of 12 individuals who are linked to these entities.
The U.S. Securities and Exchange Commission has unveiled parallel civil charges.
Notably, the investigation included an FBI sting operation that involved creating a fake token called "The NexFundAI Token" in order to trick the fraudsters into offering their fraudulent services. The sting operation, which was part of the undercover investigation, has been described as "unprecedented."
"The SEC appreciates the assistance of the FBI and the United States Attorney’s Office for the District of Massachusetts, which today announced parallel criminal actions," the SEC's press release said.
Market-manipulation-as-a-service
ZM Quant was offering "market-making" services for cryptocurrencies. Baijun Ou, Ruiqi Liu, and two unnamed co-conspirators who worked for the firm allegedly manipulated the trading volume and price of various cryptocurrencies in order to enrich themselves.
Illegal services that included market manipulation were being privately offered to some clients.
The defendants were actively soliciting investors to buy cryptocurrencies with the help of online marketing and messaging applications. For instance, they allegedly engaged in inflating the price of the Saitama token by using a private chartroom on Telegram. The token's trading volume would be artificially boosted on the BitMart exchange.
Meanwhile, Gotbit has been accused of artificially boosting the trading volume of the Robo Inu token to $1 million.
Yuri Molchan
Vladislav Sopov
Dan Burgin