The U.S. Department of Justice (DOJ) has pressed charges against 10 foreign nationals from four cryptocurrency firms, Gotbit, Vortex, Antier, and Contrarian, for creating pump-and-dump schemes, according to a DOJ press release. The announcement revealed a ring of wash trading designed to trick investors into buying tokens at artificially inflated prices.
Operation token mirrors and the FBI trap
The investigation was fueled by a clever sting dubbed Operation Token Mirrors, which began in May 2024. started with the FBI creating a fake Ethereum-based token called NexFundAI, appearing as a legitimate project, agents approached these companies for fake market-making services, to see who would fall into the trap.
Wash trading as a service: how firms sold fake trading volume
The earlier-mentioned firms created wash-trading packages with different levels of trading volume to scam retail investors. This undercover operation exposed the very normalized scams in the crypto industry and enabled the FBI to document the illegal activities from the inside.
Following the investigation, three high-level executives were recently arrested in Singapore and extradited to face a federal court in Oakland. Among those appearing in court were Manu Singh, the 34-year-old CEO of Contrarian, along with CFO Kushagra Srivastava and business development associate Vasu Sharma.
These individuals are accused of wire fraud and conspiracy, which could carry up to 20 years in prison and $250,000 in fines per violation. till now, authorities have seized over $25 million in cryptocurrency across the much broader investigation.
Gotbit dismantled after plea and sentencing
The most well-known firm that fell into the trap, Gotbit, has already been dismantled. The company’s CEO was extradited from Portugal and sentenced to eight months in prison after pleading guilty to wire fraud and conspiracy.
Gotbit allegedly used bots to trade between its own wallets, creating fake trading volume for more than 60 tokens. Now, Gotbit is under five years of probation and has been ordered to cease all operations permanently.
In a classic pump-and-dump, these firms used “structured trading” to fabricate demand. During the pump phase, bots traded a token back and forth to spike the volume and price metrics on tracking sites, making the project look more popular. This acted as the bait, leading retail investors and algorithms to jump in, thinking they had found the next big project.
Once the price goes high, the manipulators would dump their holdings, causing the price to crash, leaving honest traders with barely anything.
