Federal Prosecutors Charge Market Makers for Manipulating Cryptocurrency Markets, SEC Files Civil Charges Against Gotbit

Federal prosecutors have charged two alleged market makers, along with several crypto projects and more than a dozen individuals, for manipulating various cryptocurrency markets.

They claim these parties profited from fees and sold manipulated coins at inflated prices.

According to the unsealed charging documents, Gotbit and ZM Quant engaged in wash trading. This practice made their activity look more legitimate than it actually was. They sold some tokens at "artificially inflated prices" and marketed these coins on various platforms. They even convinced exchanges to let them buy tokens with reduced fees.

Prosecutors argue that both Gotbit and ZM Quant publicly claimed to be legitimate market makers. However, behind the scenes, they offered clients illegal services, including wash trading.

In Gotbit’s case, the illegal activities weren’t very discreet. Back in 2019, co-founder Alexey Andryunin, then just a 20-year-old college student, explained to CoinDesk how their wash trading worked. He was straightforward about the questionable nature of his business, admitting that Gotbit wasn’t registered anywhere because it was “not entirely ethical.”

On the other hand, ZM Quant was registered in the British Virgin Islands. However, the employees named in the indictment were based in Hong Kong. Gotbit, while not registered, is believed to have employees from Russia.

The list of manipulated tokens includes Robo Inu, which saw a price spike after the indictment was made public. Other defendants mentioned include VZZN, NextFundAI, and Saitama. Each of these tokens, including Robo Inu, is classified as a security. Several individuals involved in these projects, like Robo Inu’s founder Vy Pham, have also been named as defendants.

In a related move, the U.S. Securities and Exchange Commission (SEC) announced civil charges against Gotbit and its employee director, Fedor Kedrov, who is a resident of Russia.