Three market making firms allegedly promised to gin up an avalanche of fake trades to boost the value of NexFundAI’s cryptocurrency token. What they didn’t know was that NexFundAI wasn’t a real company. It was part of an elaborate sting operation by federal prosecutors.
Representatives of ZM Quant, CLS Global and MyTrade were among 15 crypto promoters and traders charged with market manipulation and fraud in a wide-ranging probe prompted by a tip from the US Securities and Exchange Commission, authorities in Boston said in a statement Wednesday.
The scheme involved wash trades — using accounts you control to trade assets back and forth to create the false impression of volume, the government said. According to court documents, one market maker told potential clients on a March 18 video call, “If you guys have requirements on the price, for example, like, pump the price from one dollar to two dollars, we will give you a plan.”
The sting operation led to the seizure of more than US$25 million (S$32.7 million) in cryptocurrency, and multiple trading bots responsible for wash trades for about 60 different cryptocurrencies were deactivated, prosecutors said.
“Wash trading has long been outlawed in the financial markets,” Joshua Levy, acting US attorney for Massachusetts, said in a statement. “These are cases where an innovative technology — cryptocurrency — met a century-old scheme: the pump and dump.”
SEC Tip
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The investigation started with an SEC tip about a crypto company called Saitama, which was based near Boston, Jodi Cohen, head of the FBI’s Boston office, said at a press conference. Prosecutors allege Saitama used market makers to manipulate the price of its token. Six people associated with Saitama were among those charged, according to the press release.
Investigating Saitama led authorities to cooperating witnesses who helped them set up the fake crypto firm, NexFundAI. In video calls and in Telegram chats, market makers offered to manipulate the price of NexFundAI’s token.
Among those charged was Aleksei Andriunin of Gotbit Consulting LLC, who was arrested in Portugal on Oct. 8 and is awaiting extradition, the government said. Andriunin wasn’t involved with NexFundAI, but Gotbit made tens of millions of dollars by providing similar market manipulation services, according to prosecutors.
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In 2019, when he was a sophomore at Moscow State University, Coindesk reported that Andriunin bragged about how he could create fake trading volume.
“The business is not exactly ethical,” he said at the time, according to authorities.
