US charges 3 cryptocurrency firms and 15 people, including 2 with Hong Kong ties, with fraud
Prosecutors say the defendants engaged in sham trades to artificially inflate the trading volume of cryptocurrency tokens
Three cryptocurrency companies and 15 people have been charged with engaging in widespread fraud and market manipulation following an investigation in which the US Federal Bureau of Investigation (FBI) for the first time directed the creation of a new digital token to help authorities ferret out crime.
Federal prosecutors in Boston charged the firms Gotbit, ZM Quant, CLS Global and the leaders and employees of those and other companies in a takedown that has led to four arrests, agreements by five people to plead guilty and the seizure of over US$25 million worth of cryptocurrency.
Acting US Attorney Joshua Levy said the defendants engaged in sham trades to artificially inflate the trading volume of various cryptocurrency tokens before selling them off, “leaving innocent investors holding the bag”.
“This is a case where new-age technology, cryptocurrency, meets an old school fraud, in this case a ‘pump and dump’ scheme, which is as old as the stock markets,” Levy told reporters.
As part of the investigation, the FBI directed the creation of a cryptocurrency company, NexFundAI, which had a token on the Ethereum blockchain that prosecutors said ZM Quant, CLS Global and another company, MyTrade, agreed to help manipulate.
Authorities said that token was traded but that they carefully monitored to minimise the risk retail investors might buy it before disabling trading. The US Securities and Exchange Commission filed related civil cases as well.
