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BREADCRUMB

 1. Justice.gov
 2. U.S. Attorneys
 3. District of Massachusetts
 4. Press Releases
 5. Eighteen Individuals and Entities Charged In International Operation
    Targeting Widespread Fraud and Manipulation In The Cryptocurrency Markets


Press Release


EIGHTEEN INDIVIDUALS AND ENTITIES CHARGED IN INTERNATIONAL OPERATION TARGETING
WIDESPREAD FRAUD AND MANIPULATION IN THE CRYPTOCURRENCY MARKETS

Wednesday, October 9, 2024
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For Immediate Release
U.S. Attorney's Office, District of Massachusetts
First-ever criminal charges against financial services firms for market
manipulation and “wash trading” in the cryptocurrency industry

BOSTON – Eighteen individuals and entities have been charged for widespread
fraud and manipulation in the cryptocurrency markets. Charges were unsealed in
Boston against the leaders of four cryptocurrency companies, four cryptocurrency
financial services firms (known as “market makers”) and employees at those
firms.

Four defendants have pleaded guilty, another defendant has agreed to plead
guilty, and authorities apprehended three other defendants in Texas, the United
Kingdom and Portugal this week. More than $25 million in cryptocurrency has been
seized and multiple trading bots responsible for millions of dollars’ worth of
wash trades for approximately 60 different cryptocurrencies have been
deactivated.

According to the charging documents, the defendants who created cryptocurrency
companies made false statements about their cryptocurrencies (“tokens”) and
executed sham trades in those tokens (“wash trades”) to create the appearance of
trading activity that would make the tokens look like good investments. These
deceptive tactics allegedly attracted new investors and purchasers, which
resulted in an increase in the tokens’ trading prices. The defendants are then
alleged to have sold their tokens at the artificially inflated prices, a fraud
commonly known as a “pump and dump.” The largest of these cryptocurrency
companies, Saitama, at one point had a multi-billion-dollar market value.

The cryptocurrency companies also allegedly hired financial services firms (
“market makers”) to wash trade their tokens in exchange for payment. As one
market maker defendant, who has agreed to plead guilty, described the practice
to a prospective client: the “objective on the secondary markets” is to find
“other buyers from the community, people you don’t know about or don’t care
about” because “we have to make [the other buyers] lose money in order to make
profit.”

Three market makers—ZM Quant, CLS Global and MyTrade—along with their employees
are charged with allegedly wash trading and/or conspiring to wash trade on
behalf of NexFundAI, a cryptocurrency company and token created at the direction
of law enforcement as part of the government’s investigation. A fourth market
maker, Gotbit, its CEO, and two of its directors are also charged for
perpetrating a similar scheme.

Specifics regarding the defendants and conduct are detailed in Attachment A
below.

> “This investigation, the first of its kind, identified numerous fraudsters in
> the cryptocurrency industry. Wash trading has long been outlawed in the
> financial markets, and cryptocurrency is no exception. These are cases where
> an innovative technology – cryptocurrency – met a century old scheme – the
> pump and dump. The message today is, if you make false statements to trick
> investors, that’s fraud. Period. Our Office will aggressively pursue fraud,
> including in the cryptocurrency industry,” said Acting United States Attorney
> Joshua Levy. “These charges are also a stark reminder of how vigilant online
> investors must be and that doing your homework before diving into the digital
> frontier is critical. People considering making investments in the
> cryptocurrency industry should understand how these scams work so that they
> can protect themselves.”

“What the FBI uncovered in this case is essentially a new twist to old-school
financial crime. ‘Operation Token Mirrors’ targeted nefarious token developers,
promoters, and market makers in the crypto space. What we uncovered has resulted
in charges against the leadership of four cryptocurrency companies, and four
crypto ‘market makers’ and their employees who are accused of spearheading a
sophisticated trading scheme that allegedly bilked honest investors out of
millions of dollars,” said Jodi Cohen, Special Agent in Charge of the Federal
Bureau of Investigation, Boston Division. “The FBI took the unprecedented step
of creating its very own cryptocurrency token and company to identify, disrupt,
and bring these alleged fraudsters to justice.”

If you bought or sold any of the tokens referenced below, please fill out this
form.

The Securities & Exchange Commission has filed civil complaints alleging
violations of the securities laws in relation to the conduct at Gotbit, CLS, ZM
Quant, Saitama and Robo Inu. Valuable assistance was provided by the Federal
Bureau of Investigation’s Legal Attachés (Madrid and London), Portugal’s Policia
Judiciaria European Network of Fugitive Active Search Team (ENFAST), the United
Kingdom’s National Crime Agency’s National Extradition Unit, the Internal
Revenue Service Criminal Investigation, Boston Field Office and the Criminal
Division’s Computer Crime and Intellectual Property Section, National
Cryptocurrency Enforcement Team.

Acting United States Attorney Joshua S. Levy and Jodi Cohen, Special Agent in
Charge of the Federal Bureau of Investigation, Boston Division made the
announcement. Assistant U.S. Attorneys Christopher J. Markham and David M.
Holcomb of the Securities, Financial & Cyber Fraud Unit are prosecuting the
cases.  

The details contained in the charging documents are allegations. The defendants
are presumed to be innocent unless and until proven guilty beyond a reasonable
doubt in the court of law.  

###
 

ATTACHMENT A

The following individuals and entities have been charged in U.S. District Court
in Boston, Mass.:

Aleksei Andriunin, Fedor Kedrov, Qawi Jalili, Gotbit Consulting LLC (Gotbit) –
According to court documents, Gotbit was a well-known “market maker” in the
cryptocurrency industry. Aleksei Andriunin, 26, of Russia and Portugal, was
Gotbit’s Chief Executive Officer and Founder. Andriunin was arrested on Oct. 8,
2024 in Portugal and awaits extradition. Fedor Kedrov, of Russia, was Gotbit’s
Director of Market Making. Qawi Jalili, of Russia was Gotbit’s Director of
Sales. Gotbit, Kedrov and Jalili are each charged with wire fraud and conspiracy
to commit market manipulation and wire fraud. Andriunin is also charged in a
separate criminal complaint with wire fraud, conspiracy to commit market
manipulation and wire fraud and conspiracy to commit money laundering.

It is alleged that between 2018 and 2024, Gotbit provided market manipulation
and wash trading services to several cryptocurrency companies, including
companies located in the United States. Gotbit allegedly made wash trades worth
millions of dollars on behalf of clients and received tens of millions of
dollars in proceeds for these illicit services. In a 2019 interview published
online, Andriunin allegedly described how he developed a code to wash trade and
artificially inflate cryptocurrency trading volume. Andriunin allegedly kept
track of Gotbit’s market manipulation, including with spreadsheets that compared
“Created Volume” from wash trades with naturally occurring “Market Volume.”
Gotbit’s employees, including Jalili and Kedrov, allegedly described these wash
trading tactics to prospective clients and how to avoid detection. Jalili and
Kedrov also allegedly provided these services to multiple cryptocurrencies,
including the Saitama and Robo Inu cryptocurrencies.

Riqui Liu, Baijun Ou, ZM Quant Investment LTD (ZM Quant) – ZM Quant was a
“market maker” in the cryptocurrency industry that allegedly advertised illicit
market manipulation services to clients. Riqui Liu, 26, of the United Kingdom
and Hong Kong, was an employee of ZM Quant. Baijun Ou, 32, of Hong Kong, was
also an employee of ZM Quant. ZM Quant, Liu and Ou are each charged in a
superseding indictment with wire fraud and conspiracy to commit market
manipulation and wire fraud.

According to court documents, ZM Quant allegedly advertised a “trading bot” that
could “create volume.” ZM Quant employees allegedly discussed these illicit
services with clients through Telegram messages and during video
teleconferences. For example, as alleged in the charging documents, during a
video teleconference in March 2024, Liu and Ou described how ZM Quant would
trade “maybe ten times per minute or twenty times a minute” to “increase the
trading volume” and “pump the price.” Liu and Ou also described how ZM Quant
allegedly used multiple trading wallets to avoid having the trading look “fake.”
It is further alleged that ZM Quant provided market manipulation services for
multiple cryptocurrency companies, including Saitama and NexFundAI.

Andrey Zhorzhes, CLS Global FZC, LLC (CLS) – CLS was a “market maker” in the
cryptocurrency industry that allegedly advertised illicit market manipulation
services to its clients. Andrey Zhorzhes, of the United Arab Emirates, was an
employee of CLS. Both CLS and Zhorzhes are charged in an indictment with wire
fraud and conspiracy to commit market manipulation and wire fraud.

It is alleged that Zhorzhes described to a prospective client how CLS’s
algorithm generated trading volume on multiple cryptocurrency exchanges, as
follows: 

 * “We have an algorithm that . . . basically does self-trades, buying and
   selling.”
 * “The idea of volume generation is . . . so the token looks organic and looks
   live and people get interested in trading it.”
 * “It’s very hard to track. . ..We’ve been doing that for many clients.”
 * “I know that it’s wash trading and I know people might not be happy about
   it.”

Zhorzhes and other CLS traders allegedly provided these market manipulation
services for NexFundAI.

Liu Zhou, MyTrade MM – MyTrade MM was another “market maker” in the
cryptocurrency industry that advertised illicit market manipulation services to
its clients, including “pump and dump” consulting services and “wash trades”
facilitated by “bots.” Liu Zhou, 39, of China and Canada, was the founder of
MyTrade MM. Zhou is charged and has agreed to plead guilty to conspiracy to
commit market manipulation and wire fraud.

MyTrade MM’s clients had access to a dashboard on MyTrade MM’s website through
which clients specified the desired amount of daily wash trades on identified
cryptocurrency exchanges. MyTrade MM’s dashboard described the service as
“Volume Support” and allowed for millions in wash trades per day for each client
cryptocurrency, for example:

In conversations with purported promoters of NexFundAI, Zhou allegedly described
MyTrade MM as superior to “CLS” and “Gotbit” because those market makers “keep
clients in the dark” and “control the pump and dump,” which means “they can do
inside trading easily.” Zhou allegedly also described the various purposes for
wash trading, including showing “continuous trading activity every hour”;
generating large enough trading volumes for cryptocurrency exchanges to waive
listing fees; and executing “pump and dumps.” According to court documents, Zhou
further described that the “objective on the secondary markets” was to find
“other buyers from the community, people you don’t know about or don’t care
about” because “we have to make [the other buyers] lose money in order to make
profit.”

Manpreet Kohli, Haroon Mohsini, Nam Tran, Max Hernandez, Russell Armand, Vy
Pham, Saitama LLC (Saitama) – Saitama was a cryptocurrency company, originally
incorporated in Massachusetts in August 2021.

Manpreet Kohli, 43, of the United Kingdom, was the CEO of Saitama. Kohli was
arrested in the United Kingdom on Oct. 7, 2024 and is awaiting extradition.
Haroon Mohsini, 37, of Texas, also worked at Saitama. Mohsini was arrested on
Oct. 7, 2024 in the Southern District of Texas. Nam Tran, 32, of Vietnam, worked
at Saitama and is currently in Vietnam. Kohli, Mohsini and Tran are each charged
in a superseding indictment with wire fraud, market manipulation, and conspiracy
to commit wire fraud, commit market manipulation and conduct an unlicensed money
transmitting business. Max Hernandez, 36, of Massachusetts, and Russell Armand,
42, of Texas, also worked at Saitama and are charged separately and have both
pleaded guilty to market manipulation and conspiracy to commit wire fraud and to
operate an unlicensed money transmitting business. Vy Pham, 32, of California,
is also charged for conduct at a different cryptocurrency company but, as part
of that guilty plea, admitted to certain conduct involving Saitama.

Saitama allegedly purported to create a series of products that could be used
with its token and, at its peak, boasted a market value of $7.5 billion.
Saitama’s leadership allegedly made a variety of false public statements,
including that Saitama’s business plan had been reviewed by regulators, that its
leadership was not selling the Saitama tokens they owned and that the Saitama
token was coded in a way that prevented market manipulation. According to
charging documents, in reality Saitama’s leadership was actively manipulating
the market for the Saitama token and secretly selling their Saitama tokens for
tens of millions in profits.

Saitama’s market manipulation campaign allegedly began in or about July 2021,
when leadership coordinated a series of small purchases spread across multiple
cryptocurrency wallets. These trades were coordinated on Telegram, where Armand
allegedly explained that the goal was to “create an illusion of massive buys and
new holders” to “incite ppl [people] to buy 
more...W[e] want list of small buys to look like it’s mor[e] buyers. That’s the
idea.” Saitama’s leadership allegedly confirmed their purchases to one another,
discussed how they were successfully getting others to purchase the Saitama
cryptocurrency and exchanged “pump it” memes and GIFs:




Thereafter, the Saitama leadership allegedly paid several market makers to wash
trade the Saitama cryptocurrency on cryptocurrency exchanges, including BitMart,
LBank and XT.com. The market makers that Saitama paid allegedly included ZM
Quant and Gotbit.

Robo Inu Finance (Robo Inu) – Robo Inu was a cryptocurrency company and token
that Vy Pham created after she left Saitama in 2021. Pham has been charged and
agreed to plead guilty to conspiracy to commit market manipulation, to commit
wire fraud and to operate an unlicensed money transmitting business. Pham
founded and promoted Robo Inu from the United States. Like Saitama, Robo Inu
allegedly purported to create a series of products that could be used with its
cryptocurrency. Beginning in or about 2022, Robo Inu allegedly paid Gotbit to
artificially inflate the trading volume of the Robo Inu token through wash
trades on cryptocurrency exchanges such as Bitmart.

Michael Thompson, VZZN – VZZN was a cryptocurrency company and token that Armand
created after he left Saitama in 2023. Michael Thompson, 50, of Virginia, also
worked at VZZN. As with Armand, Thompson is charged and pleaded guilty to
conspiracy to commit market manipulation. VZZN allegedly purported to be a video
streaming service that could be used with the VZZN token. While promoting that
service, Armand and Thompson allegedly also made misleading public statements
about VZZN and artificially inflated the trading volume of the VZZN token
through wash trades.

Bradley Beatty, Lillian Finance LLC (Lillian Finance) - Lillian Finance was a
cryptocurrency company and token founded by Bradley Beatty, 48, of Florida.
Beatty is charged in an indictment with wire fraud. Lillian Finance allegedly
purported to use blockchain technology in the healthcare industry and to use a
portion of proceeds generated from token sales for charitable purposes. Beatty
allegedly made a series of false statements about Lillian Finance to attract
investors, for example, that he was a defense contractor and that he had
addressed Congress on the topic of cryptocurrency. Thereafter, it is alleged
that Beatty generated hundreds of thousands of dollars in proceeds from retail
sales of the Lillian Finance token and misappropriated a portion of Lillian
Finance’s profits that were supposed to be used for charity.

The charge of market manipulation provides for a sentence of up to 20 years in
prison, up to three years of supervised release, a fine of up to $5 million or
twice the gross gain or loss from the offense and forfeiture. The charge of wire
fraud provides for a sentence of up to 20 years in prison, up to three years of
supervised release, a fine of up to $250,000 or twice the gross gain or loss
from the offense, restitution and forfeiture. The charge of conspiracy to commit
wire fraud, market manipulation and/or to conduct an unlicensed money
transmitting business provides for a sentence of up to five years in prison, up
to three years of supervised release, a fine of up to $250,000 to twice the
gross gain or loss from the offense, restitution and forfeiture. The charge of
conspiracy to commit money laundering provides for a sentence of up to 20 years
in prison, three years of supervised release, a fine of $500,000, or twice the
value of the criminally derived property, whichever is greater, and forfeiture.
Sentences are imposed by a federal district court judge based upon the U.S.
Sentencing Guidelines and statutes which govern the determination of a sentence
in a criminal case.

###

Updated October 9, 2024

--------------------------------------------------------------------------------

Topics
Cybercrime
Financial Fraud
Securities, Commodities, & Investment Fraud
Component
USAO - Massachusetts


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