The FBI created a crypto token named ‘NexFundAI’ to expose fraudsters involved in market manipulation, leading to charges against 18 individuals and companies in a historic case of crypto fraud. This marks the first criminal prosecution targeting crypto market manipulation and “wash trading,” which artificially inflates trading volumes to mislead investors.
The case centers around four major crypto firms—Gotbit, ZM Quant, CLS Global, and MyTrade—accused of inflating the value of over 60 tokens, including the Saitama Token. At its peak, Saitama’s market cap reached $7.5 billion, but authorities claim this was the result of deceptive trading tactics. The FBI’s covert strategy was to launch a fake token to attract the services of these firms, which specialize in manipulating trading volumes and prices for profit.
Jodi Cohen, Special Agent in Charge of the FBI’s Boston Division, stated, “The FBI took the unprecedented step of creating its own token to identify and disrupt these alleged fraudsters.” The scheme involved using multiple wallets to carry out fake trades and creating the illusion of active market demand to attract unsuspecting investors. One ZM Quant employee bluntly described their role as making “other buyers lose money to make a profit.”
The fraudulent activity resulted in a massive “pump and dump” operation, where the conspirators cashed out at high values after falsely boosting token prices. Prosecutors revealed that $25 million in crypto has been seized, and multiple trading bots used in the sham trades have been disabled. Several defendants have already pleaded guilty or are in the process of doing so, while others were arrested across the US, UK, and Portugal.
Assistant US Attorney Joshua Levy highlighted that wash trading is illegal in traditional markets, and the same laws now apply to digital assets. This effort, called “Operation Token Mirrors,” is seen as a significant crackdown on fraud in the expanding crypto industry. The penalties for those convicted could reach up to 20 years in prison for charges of market manipulation and wire fraud.
The case serves as a strong warning to the crypto community and investors about the dangers of manipulation in unregulated markets. Investors are reminded to exercise caution and conduct thorough research before engaging in digital asset trading. As the investigation continues, the outcome could set a legal precedent for future cases in the crypto space.
