U.S. Authorities Charge Gotbit and Other Market Makers in Crypto Manipulation Case

October 10, 2024 3 min
Daniel Bennett Twitter
Daniel Bennett
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U.S. Authorities Charge Gotbit and Other Market Makers in Crypto Manipulation Case
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In a groundbreaking move, U.S. federal prosecutors in Boston have filed criminal charges against Gotbit and several other financial companies for their involvement in market manipulation and wash trading in the cryptocurrency industry. This marks the first time in history that such charges have been brought against companies involved in manipulating the crypto markets. A total of 18 individuals and organizations, including prominent market-making firms such as Gotbit, ZM Quant, and CLS Global, are accused of orchestrating fraudulent schemes to inflate trading volumes and prices of various crypto tokens.

One of the most high-profile individuals charged in the case is Alexey Andryunin, the 26-year-old founder and CEO of Gotbit, a well-known market maker in the crypto space. Andryunin was arrested in Portugal and awaits extradition to the U.S. Prosecutors allege that from 2018 to 2024, Gotbit provided services to several crypto projects, helping them artificially boost trading activity and create the illusion of strong market interest. This fake activity, according to the charges, led to inflated token prices, allowing the companies to sell their assets at a profit, leaving unsuspecting buyers with overvalued tokens. In 2019, Alexey Andryunin told Coindesk in detail how market manipulations by Gotbit have been performed. Since that moment, there have been multiple interviews with Andryunin on that matter.   

The case also highlights the involvement of other executives, including Kavi Jalili and Fedor Kedrov from Gotbit, and the wide range of crypto tokens manipulated in these schemes, such as Robo Inu, VZZN, and SAITAMA. Prosecutors claim that these activities are part of an illegal practice commonly known as “Pump & Dump,” where companies artificially inflate asset prices to attract new buyers, only to dump the assets once prices rise.

The U.S. Securities and Exchange Commission (SEC) has filed parallel charges against Gotbit and other market makers, seeking civil penalties for manipulating the markets of various crypto assets. The SEC's charges focus on individuals and entities, including Russell Armand and Maxwell Hernandez, who allegedly hired market makers like Gotbit to carry out these deceptive practices.

One of the more innovative aspects of the investigation was the role of the FBI, which created its own Ethereum-based token, NextFundAI, as part of the probe to uncover and stop fraudulent activity. This token was designed to expose bad actors in the crypto space and identify manipulation schemes. According to investigators, wallets involved in creating NextFundAI were linked to significant profits made from manipulated tokens, earning more than $11 million in some cases.

The potential penalties for those involved are severe, with market manipulation charges carrying up to 20 years in prison, fines of up to $5 million, or even double the profits made from the fraudulent activities. The case underscores a broader crackdown on fraudulent practices in the cryptocurrency industry, signaling that authorities are willing to take aggressive action against those who seek to manipulate markets and deceive investors.

As the investigation unfolds, the crypto industry is bracing for further repercussions, with many market participants concerned about the implications for the future. The arrest of Gotbit's leadership is just one example of the U.S. government's commitment to rooting out fraud in a rapidly growing and largely unregulated market. This case serves as a stark warning to other companies involved in questionable activities, emphasizing that the era of unchecked market manipulation in the crypto space may be coming to an end.

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