Federal prosecutors have charged three market-making firms with manipulating the value of a fake cryptocurrency, NexFundAI, in a sophisticated sting operation that has resulted in the arrest of 15 individuals. ZM Quant, CLS Global, and MyTrade are among the firms accused of orchestrating fake trades to inflate the value of NexFundAI’s token, unaware that the company was a fabrication designed to expose market manipulation.
The investigation, which was led by U.S. federal prosecutors and prompted by a tip from the Securities and Exchange Commission (SEC), culminated in the seizure of more than $25 million in cryptocurrency. The operation also led to the deactivation of multiple trading bots used to execute wash trades for approximately 60 different cryptocurrencies, according to a statement released by authorities in Boston on Wednesday.
Wash trading—where assets are traded back and forth to create the illusion of high trading volume—has long been illegal in traditional financial markets. It has now emerged as a major concern in the world of cryptocurrency. “Wash trading has long been outlawed in the financial markets,” said Joshua Levy, acting U.S. attorney for Massachusetts. “These are cases where an innovative technology, cryptocurrency, met a century-old scheme: the pump and dump.”
Court documents reveal that the firms involved were more than willing to manipulate the market to boost NexFundAI’s token. During a March 18 video call, one market maker allegedly told prospective clients, “If you guys have requirements on the price, for example, like, pump the price from one dollar to two dollars, we will give you a plan.”
The elaborate sting was set in motion after investigators received information about a Massachusetts-based crypto firm called Saitama, which had allegedly used market makers to manipulate the price of its token. Speaking at a news conference, Jodi Cohen, head of the FBI’s Boston office, said, “The investigation into Saitama led us to cooperating witnesses who helped set up the fake company NexFundAI.”
Six individuals connected to Saitama were among those charged in the wide-ranging market manipulation probe. Through video calls and chats on encrypted messaging platforms like Telegram, market makers allegedly offered to inflate the value of NexFundAI’s token, unaware they were communicating with federal agents.
One of the key individuals implicated in the investigation is Aleksei Andriunin, the founder of Gotbit Consulting LLC, a company accused of providing similar market manipulation services to a number of cryptocurrency projects. Andriunin was arrested in Portugal on October 8 and is awaiting extradition to the United States. Though he was not directly involved with NexFundAI, prosecutors allege Gotbit earned tens of millions of dollars by creating fake trading volumes for other crypto tokens.
In a 2019 report by Coindesk, Andriunin, who was then a student at Moscow State University, allegedly boasted about the ease with which he could manipulate trading volumes. “The business is not exactly ethical,” he reportedly said at the time, a remark that now takes on greater significance as the scale of his alleged involvement in crypto manipulation becomes clear.
As federal authorities continue to crack down on crypto market abuses, this operation serves as a reminder of the risks that still plague the digital asset industry. The sweeping investigation has exposed the dark underbelly of a market that, despite its potential, remains vulnerable to manipulation schemes.