The U.S. Federal Bureau of Investigation has taken an unprecedented step in unveiling a significant crypto market manipulation scheme, aptly launching an Ethereum-based token as part of their investigation into this complex operation. Known as NexFundAI, the token served as a crucial tool in uncovering deceptive practices among 18 individuals and four major cryptocurrency firms.
Unveiling Crypto Market Manipulation: The FBI’s Ethereum-Based Initiative
The indictment, which was revealed in a Boston federal court, accuses the defendants of engaging in “wash trading” and other schemes designed to deceptively inflate the prices of numerous crypto tokens. Wash trading involves the same party repetitively buying and selling an asset to fabricate high trading volumes, thereby misleading potential investors. The FBI introduced the token within the market to penetrate and investigate companies suspected of manipulating cryptocurrency values.
Investigating Crypto Market Manipulation: Companies and Tactics
This operation illuminated the involvement of firms like Gotbit, ZM Quant, CLS Global, and MyTrade. Jodi Cohen, an FBI Special Agent leading the Boston Division, remarked on the operation’s “unprecedented” nature, emphasizing their intent to “identify, disrupt, and apprehend those allegedly involved in fraudulent activities.” The indictment specifies how over 60 cryptocurrency tokens were manipulated, including the Saitama Token, which once held a substantial market valuation.
Defendants allegedly employed deceptive strategies to attract investors, artificially boosting token prices. This allowed them to sell their assets at inflated rates, effectively orchestrating classic pump-and-dump schemes. Market manipulation was executed through market makers such as ZM Quant and Gotbit, which engaged in fake transactions across multiple wallets, creating a semblance of genuine trading activity.
The FBI has confiscated over $25 million in cryptocurrency assets and dismantled trading bots accountable for sham trades. While several defendants have admitted guilt, others were taken into custody across the United States, the United Kingdom, and Portugal.
Assistant US Attorney Joshua Levy commented on the case, equating wash trading in crypto to illegal maneuvers within traditional financial markets. “These charges,” he stated, “remind online investors of the importance of thorough research before venturing into cryptocurrency investments.” Such knowledge is crucial for protecting against these kinds of schemes.
Those charged in the case could face up to 20 years in prison, as they have been accused of market manipulation and wire fraud. Concurrently, the U.S. Securities and Exchange Commission has lodged civil complaints, asserting securities law violations in relation to the conduct exhibited by Gotbit, CLS, ZM Quant, and others.
Featured image via Unsplash.
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