- 18 individuals and entities have been charged in an international cryptocurrency fraud operation
- Four defendants have already pleaded guilty, and authorities have seized over $25 million in cryptocurrency
- The scheme involved fraudulent “wash trades” and market manipulation to inflate crypto prices
U.S. authorities have charged 18 people and companies in an international cryptocurrency fraud case, marking the first of its kind. The charges center around market manipulation tactics, such as “wash trades,” used to artificially boost the prices of cryptocurrencies. The elaborate scheme involved misleading investors and resulted in millions of dollars in cryptocurrency seizures, to which four individuals have already pleaded guilty.
Wash Traders Forced to Come Clean
According to a Department of Justice (DOJ) press release, the 18 individuals and entities charged were involved in fraudulent “pump and dump” schemes where they created fake trading activities to inflate cryptocurrency prices and deceive investors into believing there was high demand.
These fake transactions were coordinated using automated bots to generate misleading market activity. Once the prices were inflated, they sold off large amounts of the cryptocurrency, leading to a price collapse and significant investor losses. This kind of activity has been taking place ever since crypto went mainstream in 2017, but this is the first time that anyone has been pulled up for it in any major way.
The investigation uncovered that certain cryptocurrency companies, including Gotbit and ZM Quant, were responsible for orchestrating illegal wash trades that inflated cryptocurrency prices, leading to substantial investor losses. Acting U.S. Attorney Joshua Levy, this case represents a major breakthrough in exposing cryptocurrency fraudsters. Levy stated, “The fraudulent techniques that have long been used in traditional markets are now being applied in the digital asset industry.”
FBI Involved in Operation
The FBI played a pivotal role in this investigation, employing sophisticated techniques to track the fraudsters. Jodi Cohen, Special Agent in Charge of the FBI’s Boston Division, explained how the Bureau’s creation of its own cryptocurrency helped expose the fraudulent trading activity, allowing it to trace transactions and identify the perpetrators.
This case marks the first time financial services firms in the cryptocurrency industry have faced criminal charges relating to market manipulation. With over $25 million in cryptocurrency already seized, authorities have warned investors to be cautious when navigating the increasingly volatile and complex world of digital assets.
