The FBI resorted to creating a cryptocurrency token to help it investigate companies accused of manipulating the crypto market. On Wednesday, the Justice Department revealed the undercover operation and announced charges against 18 individuals and companies for using various tactics, including automated bots, to inflate the value of cryptocurrencies. The crackdown targets “wash trading,” or the illegal act of buying and selling a cryptocurrency to make it seem like it’s experiencing heavy market activity, which can drive up its value. The same wash trades can also falsely create the impression that a cryptocurrency is a good investment when, in reality, it’s all part of a “pump and dump scheme” to eventually sell the asset at an inflated value —at the expense of unaware investors.
(Credit: NextFundAI)
To identify and investigate the fraudsters, the FBI created a fake cryptocurrency company called NexFundAI, which focused on developing its own token called “NEXF.” This led federal agents to create a website for the company, which used the tagline “Token with Purpose, AI with Impact” to attract interest. The FBI then used NexFundAI to solicit wash trading services from potential suspects. The agency has since charged three companies—ZM Quant, CLS Global FZC, and MyTrade MM—along with some employees for engaging in cryptocurrency manipulation.
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In addition, federal agents seized over $25 million in cryptocurrency and shut down “multiple trading bots responsible for millions of dollars worth of wash trades for approximately 60 different cryptocurrencies.” Law enforcement also arrested the CEO of another company, Gotbit, for engaging in wash trades and market manipulation from 2018 to 2024. The NexFundAI site now says it was created by the FBI “as part of an investigation into cryptocurrency fraud and market manipulation.”
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About Michael Kan
Senior Reporter
I’ve been working as a journalist for over 15 years—I got my start as a schools and cities reporter in Kansas City and joined PCMag in 2017.
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