The United States Department of Justice charged several players in the cryptocurrency market with market manipulation and fraudulent trading. In Boston, prosecutors charged the leaders of four crypto companies, four market-making firms, and staff from those entities.
Several defendants pled guilty, and additional arrests followed in Texas, the United Kingdom, and Portugal. Authorities seized more than $25 million in cryptocurrency and disabled trading bots that carried out fictitious trades worth millions.
On the night of October 10, it was learned that Alexei Andryunin, the president of Gotbit, was detained in Portugal at the request of the United States.
Gotbit and three other companies – ZM Quant, CLS Global and MyTrade – provided market making and liquidity services for various cryptocurrency tokens.
RBC notes that all firms are accused of manipulating the market, notably through wash trading designed to inflate trading volumes. The companies mostly operated with low-liquidity, second-tier crypto assets and memecoins.
What is Alexei Andryunin accused of?
Court documents describe Gotbit as a prominent market maker in the crypto sector. The founder and CEO is a 26-year-old named Alexei Andryunin, who holds both Russian and Portuguese citizenship. He was detained in Portugal on October 8 and awaits extradition to the United States. Two other Russians connected to Gotbit were detained, including Fedor Kedrov, the market creation director, and Kavi Jalili, the sales manager.
They face wire fraud charges and conspiracy to commit market manipulation and fraud.
Andryunin also faces a separate set of charges including wire fraud, conspiracy to manipulate markets, conspiracy to commit fraud, and money laundering.
Prosecutors say Gotbit supplied market manipulation and fraudulent trading services to various cryptocurrency companies, including some based in the United States, from 2018 through 2024. Gotbit allegedly processed millions of dollars in fraudulent transactions for its clients and generated tens of millions of dollars in revenue from these illegal services.
In a 2019 interview, Andryunin described how he wrote code to fake trades and inflate cryptocurrency trading volume. He tracked these manipulations by comparing the artificial volume with natural market activity using spreadsheets. Kedrov and Jalili explained these tactics to potential customers and how to avoid detection.
Operation Token Mirrors
The investigation revealed numerous fraudsters in the cryptocurrency industry, according to Acting U.S. Attorney Joshua Levy. Fraudulent trading has long been prohibited in financial markets, and cryptocurrency is no exception. Levy described the situation as a collision between innovative technology and an age-old plan to pump and dump, followed by a sharp collapse.
Levy pledged that the department will pursue fraud, including in the crypto space.
To investigate Gotbit and other cryptocurrency firms, the FBI created its own token, NexFundAI, and formed a company with the same name. Under that cover, the FBI signed an agreement to document increased trading volumes and market manipulation.
FBI agent Jody Cohen stated that the bureau took an unprecedented step by creating its own cryptocurrency token and company to detect, disrupt, and prosecute the alleged fraudsters.
She added that what the FBI uncovered represents a new development in classic financial crime. Operation Token Mirrors targeted token developers, promoters, and market makers in the crypto space, according to the agent.