Gotbit Founder Agrees to $23 Million Plea in US Crypto Manipulation Case

Key Takeaways:

• Aleksei Andriunin has agreed to plead guilty as part of a deal with US authorities.
• As part of the settlement, Andriunin will forfeit $23 million in USDT and USDC.
• The deal could help Andriunin avoid a lengthy prison sentence.

Aleksei Andriunin, the founder of crypto market maker Gotbit, has struck a significant plea deal with federal prosecutors in Massachusetts, per reports. This deal will see Andriunin forfeit around $23 million in Tether (USDT) and Circle’s USDC stablecoins, representing a significant move in the push against cryptocurrency market manipulation.

Market Manipulation Charges Lead to Asset Forfeiture

Andriunin, a citizen of Russia, was charged with wire fraud and conspiracy to commit market manipulation, among other serious offenses, related to Gotbit’s allegedly unlicensed operations. The firm was accused of running a “widespread cryptocurrency market manipulation scheme” that provided artificial trading volume for crypto projects worldwide. Gotbit engaged in “wash trading,” creating the illusion of higher trading activity and inflating prices, according to court documents.

Source: Alex Andriunin

Wash trading is an illegal practice in which an entity simultaneously buys and sells the same asset in order to create false volume and deceive other investors.

These incidents are alleged to have taken place between 2017 and 2024 while Andriunin was the CEO of Gotbit. During a 2019 interview that was subsequently referenced by the Justice Department, Andriunin himself acknowledged that Gotbit’s business model was “not entirely ethical,” indicating some awareness of its legal ambiguity.

Key Terms of the Plea Agreement: Asset Forfeiture Investigation

Under the agreement, Andriunin will plead guilty to conspiracy to commit wire fraud and market manipulation. While the original charges carried a maximum sentence of 20 years or more, the plea agreement could dramatically shorten the amount of time he might spend in prison. Under the plea agreement, the founder of Gotbit will serve a 24-month prison sentence followed by 36 months of probation. Andriunin will not be allowed to participate in any crypto-related activities during his supervised release.

The deal also states that Andriunin will not have to pay any additional fines, as he is forfeiting all cryptocurrency gained from the offenses he was charged with.

Leah Foley, an official from the US Attorney’s Office for the District of Massachusetts, stated that nothing in this agreement limits the authority of the Attorney General of the United States or any other prosecuting authority.

The forfeited assets include nearly $14 million in Tether held in two separate crypto wallets and approximately $9 million in USDC stored in two other wallets. Although these assets are registered under Gotbit Consulting LLC, court documents state that the wallets are entirely controlled by Andriunin on behalf of Gotbit. This detail underscores Andriunin’s direct involvement with the illicit funds, as outlined in court documents.

An excerpt from legal correspondence in the Gotbit founder case discussing sentencing guidelines with Massachusetts prosecutors: Law360

3 Implications of the Gotbit Founder Case for the Crypto Market

This case matters for a number of reasons. First, it underscores the importance of combating market manipulation in the cryptocurrency space, one of the recurring themes of US authorities since October 2023. Gotbit and its founder are among several entities facing legal consequences for misbehavior in the digital asset space. As Mat Di Salvo noted, the DOJ charged Gotbit, ZM Quant, CLS Global and MyTrade. The companies purportedly engaged in wash trades.

Second, this case sends a clear message to other actors within the crypto space. One warning is that the stakes often involve hefty financial penalties and even jail time.

Third, this incident shines a spotlight on the challenges in the market-making industry in crypto. Market makers are essential to fueling liquidity, but this example makes clear that their activities need to be closely monitored in order to prevent abuse. Following the announcement of the charges, numerous meme coin projects sought to distance themselves from Gotbit.