Federal Prosecutors Charge Three Crypto Firms for Market Manipulation in Landmark Case

Federal prosecutors have filed charges against three cryptocurrency companies and their employees for sham trading and market manipulation. The companies involved are Gotbit, ZM Quant, and CLS Global, along with 15 individuals facing serious allegations.

In a unique move, federal authorities created a fake token to catch the defendants manipulating its value. This marks the first time the FBI has used a crypto token to investigate financial service firms for manipulation.

Gotbit, a well-known meme market maker, was targeted alongside trading services CLS Global and ZM Quant. Prosecutors claim they have extensive evidence of fraudulent activities. For instance, one set of charges includes quotes from a call with ZM Quant leaders, revealing their tactics. One executive, Riuqi “Ricky” Lau, said, “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.”

This recording shows the defendants openly discussing their schemes. With such strong evidence, it’s no surprise that five defendants have already pleaded guilty. This has led to four arrests and the seizure of over $25 million in cryptocurrency.

The evidence isn't just limited to ZM Quant. Multiple legal filings include similarly clear evidence against the involved parties.

Gotbit's evidence includes a 2019 YouTube interview with CEO Aleksei Andriunin, where he talked about artificially inflating trade volumes for new tokens. Authorities arrested Andriunin in Portugal this past Tuesday.

What comes next from law enforcement remains uncertain. These cases could signal a broader crackdown on crypto market manipulation. Alternatively, they might serve as a warning to deter future offenses.