Federal prosecutors have brought charges against four alleged market makers: Gotbit, CLS Global, MyTrade, and ZM Quant, as well as several crypto projects and more than a dozen individuals, for manipulating various cryptocurrency markets. They reportedly benefited from fees and by selling manipulated tokens at inflated prices.

According to the court documents released on Wednesday, these entities engaged in wash trading to create a false appearance of legitimate market activity, selling some tokens at artificially inflated prices on multiple platforms and persuading exchanges to allow token purchases at lowered fees.

The U.S. Securities and Exchange Commission (SEC) has also charged ZM Quant and its employees Baijun Ou and Ruiqi Lau, Gotbit and its employee Feder Kedrov, along with CLS Global and its employee Andrey Zhorzhes, along with individuals identified as 'crypto asset promoters': Russell Armand, Maxwell Hernandez, Manpreet Singh Kohli, Nam Tran, and Vy Pham. The Department of Justice (DOJ) noted these cases were referred for prosecution two years prior by the SEC.

The defendants claimed to be legitimate market makers, while secretly providing clients with illegal services, including wash trading.

Notably, in Gotbit's case, co-founder Alexey Andryunin, then a college sophomore, publicized the mechanics of their wash trading services in 2019. He candidly acknowledged the morally questionable aspects of their operation and stated that Gotbit did not have any registration in any jurisdiction due to its unethical nature. Additional criminal charges are pending against Andryunin.

While ZM Quant was registered in the British Virgin Islands, its employees were located in Hong Kong; Gotbit had no registration but is believed to employ Russian nationals.

Tokens identified in the manipulation scheme include Robo Inu, which experienced a price increase after the indictment was made public. Other mentioned defendants include VZZN and Saitama. Each token, including Robo Inu, is classified as a security. The individuals behind these projects, including Robo Inu's founder Vy Pham, have also been implicated.

During the investigation, the FBI created an Ethereum-based token named NextFundAI with collaboration from cooperating witnesses to identify and apprehend the accused fraudsters. The token is classified as a security, though as per the court records, trading activity was limited. Joshua Levy, Acting U.S. Attorney for the District of Massachusetts, announced that trading on this token has been suspended.

Levy added that the DOJ has already secured approximately $25 million from fraudulent proceeds to be returned to investors, but did not disclose the total amount generated by the defendants.