The U.S. Attorney’s Office for the District of Massachusetts issued a press release on October 9 in which they announced criminal charges against 18 individuals and entities for their involvement in pervasive fraud and market manipulation within cryptocurrency markets.
It is the first-ever criminal case in the digital asset space to target market manipulation and “wash trading” with these charges. The defendants consist of CEOs from four cryptocurrency token issuers—Saitama, Robo Inu, VZZN, and Lillian Finance—as well as four crypto market makers—ZM Quant, CLS Global, MyTrade, and Gotbit.
The accused allegedly participated in wash trading, a strategy wherein fictitious trades were carried out to give the impression of high trading activity, as stated by the prosecution. This deceptive strategy attracted unsuspecting investors by artificially increasing the value of a variety of cryptocurrencies. It is alleged that the defendants subsequently sold their tokens at artificially inflated prices in a classic “pump and dump” scheme.
Numerous trading algorithms that were responsible for conducting cleanse transactions have been deactivated, and more than $25 million in cryptocurrency has been confiscated. The United Kingdom, Portugal, and Texas have all apprehended additional defendants, while four have already entered guilty pleas.
In order to infiltrate and investigate fraudulent activity within the cryptocurrency market, the FBI conducted a clandestine operation known as “Operation Token Mirrors,” in which agents established their own cryptocurrency token and company. This undercover operation enabled investigators to reveal the manner in which specific token issuers and market makers collaborated to fraudulently inflate token prices.
In total, authorities confiscated over $25 million in cryptocurrency and deactivated trading algorithms that were responsible for millions of dollars in launder transactions involving approximately 60 distinct cryptocurrencies.
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