FBI undercover crypto sting nets 10 indictments for wash trades

Federal grand juries have indicted 10 executives and employees at crypto market-making firms Gotbit, Vortex, Antier and Contrarian following an FBI and IRS Criminal Investigation undercover operation that exposed alleged wash trading. Three defendants, including two chief executives, were extradited from Singapore and made initial appearances in federal court in Oakland.

The case stems from Operation Token Mirrors, in which agents created several cryptocurrency tokens to test whether market-making shops would offer illicit wash trading services. Investigators allege the defendants coordinated buys and sells to inflate prices and volumes before unloading positions, misleading investors about demand and liquidity.

Wash trading is a practice where one trader or a group repeatedly buys and sells the same asset to create fake volume and influence price. Authorities describe it as a method some token projects used to appear active on exchanges when genuine interest was limited.

Three defendants were arrested in Singapore and transferred to the United States. According to a federal press release: “In addition to the three extradited defendants, two others have already pled guilty and were sentenced by U.S. District Court Judge Araceli Martínez-Olguín.” More than $1 million in cryptocurrency linked to the case has been seized.

The defendants include nationals of Russia, India, Taiwan and Serbia. The indictments allege certain employees offered or executed wash trades to inflate apparent interest, and that the firms provided market-making services to token projects.

Officials did not disclose the undercover tokens or identify all exchanges involved. Each defendant faces a maximum of 20 years in prison and a fine of up to $250,000 if convicted.

Court proceedings for the extradited defendants began in Oakland upon their arrival in the United States. Additional defendants are expected to appear in federal court as the cases progress. Gotbit had previously faced action during an earlier phase of Operation Token Mirrors, according to authorities.

The undercover work focused on newly issued tokens with limited trading history, where concentrated activity can quickly shape price and volume. Agents engaged service providers to determine whether they would perform prohibited wash trades to artificially boost trading statistics.