US Department of Justice It brought the first criminal charges against financial companies for market manipulation and fraudulent trading in the cryptocurrency industry. In Boston, charges were brought against the heads of four cryptocurrency companies, four cryptocurrency financial services companies (so-called market makers), and employees of those firms.
Four defendants pleaded guilty, another pleaded guilty. This week, authorities detained three more defendants in Texas, Britain and Portugal. More than $25 million worth of cryptocurrencies were seized and several trading bots making fictitious trades worth millions of dollars were disabled.
On the night of October 10, it was learned that Alexei Andryunin, the president of cryptocurrency market producer Gotbit, was detained in Portugal upon the request of the USA.
Gotbit and three other companies – ZM Quant, CLS Global and MyTrade, in one way or another, provided market making and liquidity creation services for cryptocurrency tokens.
RBC explains that all companies are accused of manipulating the market, particularly fictitious transactions (wash trading) to artificially inflate trading volumes of tokens. Each of the companies operated mostly with low-liquid second-tier crypto assets and memcoins.
What is Alexei Andryunin accused of?
According to court documents, Gotbit was a well-known market maker in the crypto business whose founder and CEO was 26-year-old Alexey Andryunin, who holds Russian and Portuguese citizenship. He was detained in Portugal on October 8 and is currently awaiting extradition to the United States. Two more Russians from Gotbit were detained: Market creation director Fedor Kedrov and sales manager Kavi Jalili.
They are charged with wire fraud and conspiracy to commit market manipulation and fraud.
Andryunin is also charged in a separate criminal case with wire fraud, conspiracy to commit market manipulation and conspiracy to commit fraud and money laundering.
According to the prosecutor, Gotbit provided market manipulation and fraudulent trading services to various cryptocurrency companies, including companies based in the United States, from 2018 to 2024. Gotbit allegedly processed millions of dollars in fraudulent transactions on behalf of its customers and generated tens of millions of dollars in revenue from these illegal services.
In a 2019 interview, Andryunin described how he developed code to fake trades and artificially inflate cryptocurrency trading volume. Andryunin tracked Gotbit’s market manipulations, including using spreadsheets that compared the “generated volume” from fictitious transactions to the natural “market volume.” Gotbit employees, including Jalili and Kedrov, explained these fraudulent trading tactics to potential customers and how to avoid detection.
Operation Token Mirrors
“This first-of-its-kind investigation uncovered numerous fraudsters in the cryptocurrency industry. Acting U.S. Attorney Joshua Levy said fraudulent trading has long been prohibited in financial markets, and cryptocurrency is no exception.
In his opinion, these are situations where “an innovative technology – cryptocurrency – collides with a centuries-old plan – pump and dump.” (a plan to manipulatively increase the exchange rate on the markets of securities, cryptocurrencies or other similar assets, followed by their strong collapse)“
“Today’s message is: If you make false statements to deceive investors, it is fraud. Point. Levy promised that our department will go after fraud, including in the cryptocurrency industry.
To investigate Gotbit and other cryptocurrency companies, the FBI created its own crypto token, NexFundAI, and registered a company with the same name. Under his name, the FBI signed an agreement to prove the facts of increased trading volumes and market manipulation.
According to FBI agent Jody Cohen, who participated in the investigation, “The FBI took the unprecedented step of creating its own cryptocurrency token and company to detect, disrupt, and prosecute these alleged fraudsters.”
“What the FBI uncovered in this case is actually a new development in old-school financial crime. “Operation Token Mirrors targeted unscrupulous token developers, promoters and market makers in the crypto space,” the FBI agent said.