- FBI charged three crypto companies and 15 individuals with fraud and market manipulation.
- The FBI created a new digital token to investigate the scheme.
- The defendants engaged in “pump and dump” schemes, artificially inflating token prices before selling them off.
FBI has charged three cryptocurrency companies and 15 individuals with engaging in a widespread fraud and market manipulation scheme. The charges stem from an FBI investigation that saw the agency create a new digital token to help authorities uncover the criminal activity.
The companies involved in the scheme are Gotbit, ZM Quant, and CLS Global. Several executives and employees from these companies, as well as other related entities, have also been charged. Four individuals have been arrested, while five others have agreed to plead guilty.
According to Acting U.S. Attorney Joshua Levy, the defendants engaged in “pump and dump” schemes, artificially inflating the trading volume of various cryptocurrency tokens before selling them off, leaving investors holding the bag.
To investigate the scheme, the FBI created a cryptocurrency company called NexFundAI. The company issued a token on the Ethereum blockchain that prosecutors say ZM Quant, CLS Global, and MyTrade agreed to manipulate. While the token was traded, authorities closely monitored its activity to minimize the risk of retail investors purchasing it before disabling trading.
US Regulator Joins FBI In Crackdown
The U.S. regulator the Securities and Exchange Commission has also filed related civil cases. One of the largest companies involved in the scheme, Saitama, at one point had a market value of $7.5 billion. Prosecutors allege that Saitama’s leadership manipulated the trading of its tokens and secretly sold them.
This comes at a time when platforms and influencers flouting newly created digital assets have come under intense scrutiny. Prominent blockchain investigators like ZachXBT and Wazz have called out those platforms for spreading FUD to cash out and sell off their holdings before buying back the token at a lower price. Recently, prominent figure ZachXBT has accused crypto celebrities Murad and Ansem of engaging in pump-and-dump schemes.
Although the latest indictment marks a significant blow to the cryptocurrency industry and highlights the ongoing challenges in regulating the market, weeding out bad actors is crucial to ensuring the sector’s credibility and legitimacy.
