SEC, FBI, and DOJ Target Crypto Firms in Coordinated Fraud Investigation

SEC, FBI, and DOJ Target Crypto Firms in Coordinated Fraud Investigation

In a coordinated effort, the United States Securities and Exchange Commission (SEC), the Justice Department, and the Federal Bureau of Investigation (FBI) have targeted a complex network of overlapping crypto firms and individuals accused of fraudulent activities. On Oct. 9, the SEC filed civil suits in the District Court of Massachusetts against three market makers in the crypto space: Gotbit Consulting, ZM Quant Investment, and CLS Global. A total of nine individuals were also charged in connection with the case.

The companies and individuals are accused of market manipulation, including wash trading, and fraud related to unregistered securities offerings. The elaborate scheme involved creating the illusion of market interest to manipulate cryptocurrency prices.

Gotbit Consulting and its marketing director, Fedor Kedrov, allegedly conducted market manipulation through wash trading to promote cryptocurrencies such as Saitama and Robo Inu. Wash trading involves buying and selling the same asset to create an impression of activity and inflate perceived demand. These cryptocurrencies were organized by Vy Pham, a Vietnamese citizen residing in California, who has been charged separately for unregistered securities offerings and market manipulation.

Pham and four of her associates face similar charges, with some consenting to bifurcated settlements, allowing components of their charges to be addressed separately. The other two companies, ZM Quant Investment and CLS Global, are facing similar charges related to a cryptocurrency called NexFundAI, which was actually created by the FBI as part of the investigation. Additionally, ZM Quant and individuals associated with Pham were charged in relation to the SaitaRealty coin.

The investigation involved a far-reaching effort to bring those responsible to justice. Fedor Kedrov is believed to be residing in Russia, while executives from ZM Quant live in London and Hong Kong. Another individual involved in the case lives in India. The SEC’s complaints seek permanent injunctions, disgorgement of allegedly ill-gotten gains plus interest, civil penalties, and officer and director bars for certain defendants.

In a separate statement, the FBI listed additional cryptocurrencies under investigation, including Saitama, SaitaRealty, SaitaChain, Robo Inu, VZZN, Lillian Finance, and NexFundAI. The founders of VZZN and Lillian Finance were also charged, with the founder of VZZN having connections to Saitama.

The Justice Department reported that a total of 18 individuals and one additional company, MyTrade MM, are facing charges in these coordinated actions. MyTrade MM is also accused of offering services to NexFundAI, contributing to the fraudulent activities.

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