U.S. Prosecutors Crack Down on Crypto: Issues Charges Against Four Companies and 14 Individuals

The U.S. prosecutors charged against four crypto companies: Gotbit, ZM Quant, CLS Global, and MyTrade.The charges are aimed not only at the organizations but also at 14 individuals associated with them, including their leadership teams and employees.

This move came after an in-depth investigation, leading to multiple arrests, including some that occurred internationally.

U.S. Prosecution Targets Market Manipulation in the Crypto Industry

Recent reports revealed that the U.S. Department of Justice nabbed crypto firms Gotbit, ZM Quant, CLS Global, and MyTrade for alleged sham trading and market manipulation.

The action is part of a growing list of crackdowns by U.S. authorities on misconduct within the crypto industry. Over the past year, the U.S. Justice Department has been strict on crypto companies. One of the most significant cases was against Binance, a major crypto exchange.

The prosecutors described the move as the first criminal case against financial services companies in crypto involving market manipulation and fake trading.

Meanwhile, according to Massachusetts's U.S. Attorney's office, the authorities seized over $25 million in cryptocurrency and arrested a few individuals. Four people have agreed to plead guilty.

Prosecutors say the defendants started crypto companies and lied about their cryptocurrencies. They faked trading activity to make it seem like their tokens were popular.

This tricked the investors into thinking the tokens were a good buy, leading to price increases. However, once the prices were high, the defendants sold their tokens for a profit.

Also, the defendants hired other companies, called market makers, to help them fake the trades. According to the prosecutors, the market makers were ZM Quant, Gotbit, CLS Global, and My Trade.

Joshua Levy, the acting U.S. attorney, said this scheme is similar to how new technology is used in a scam called a pump and dump.

He explained that making false claims to trick investors is a fraud, no matter what. Levy assured that the authorities will continue fighting fraud, even in cryptocurrency.

Notably, the FBI helped with the investigations. To catch the scammers, it created its fake cryptocurrency called NexFundAI to find out who was breaking the law.

According to Jodi Cohen, special agent in charge of the Boston Division, the FBI's new strategy was to find, stop, and punish the perpetrators.

SEC Takes Action

The U.S. Securities and Exchange Commission (SEC) also took action on Wednesday. The commission filedcivil chargesagainst three companies, ZM Quant, Gotbit, and CLS Global, and nine individuals connected to the case.

The SEC also said that Russell Armand, Maxwell Hernandez, Manpreet Singh Kohli, Nam Tran, andVy Pham were promoters.

They hired companies, ZM Quant and Gotbit, to engage in fake trading activity and increase the prices of their cryptocurrencies. This tricked regular investors into thinking the crypto was valuable.

Furthermore, the SEC named employees involved in the scam. ZM Quant's Baijun Ou and Ruiqi Lau, Gotbit's Fredor Kedrov, and CLS Global's Andrey Zhorzhes allegedly helped with the sham trading.

They used Wash trading" on popular crypto platforms to make it seem like the tokens were being heavily traded.

According to Sanjay Wadhwa, the deputy director of the SEC's Division of Enforcement, the latest action shows how big players in the crypto market trick regular investors. Therefore, Wadhwa warned that investors should be careful as the situation might not favor them.

The SEC's complaints demand severe penalties, including a permanent ban on the accused and disgorgement of ill-gotten gain. The regulator also requires that the court ban the defendants from becoming officers or directors in any company.

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