cryptonewsz.com
In a shocking move, the FBI created a crypto token, the NexFundAI Token, to investigate fraudulent activities in the digital assets sector. This investigation resulted in the indictment of 18 individuals and entities involved in a widespread market manipulation scheme.
About FBI’s Crypto Coin and Investigation
The NexFundAI Token, which operated on the Ethereum blockchain, was designed as a security by law enforcement to lure fraudsters into a sting operation. According to Acting U.S. Attorney Joshua Levy, this investigation is a cautionary tale for crypto investors. “If you make false statements to trick investors, that’s fraud. Period. Our Office will aggressively pursue fraud, including in the cryptocurrency industry,” Levy said.
Authorities charged leaders of four cryptocurrency companies and four market-making firms for their roles in fraudulent activities. These activities included pump-and-dump schemes and wash trading, which artificially inflated token prices.
More than $25 million worth of crypto was seized, and several trading bots responsible for manipulating the market for approximately 60 different cryptocurrencies were shut down. The FBI’s investigation, known as “Operation Token Mirrors,” targeted token developers, promoters, and market makers.
In a statement, Jodi Cohen, Special Agent in Charge of the FBI’s Boston Division, said, “What the FBI uncovered in this case is essentially a new twist to old-school financial crime.” She added that the operation sought to identify and dismantle sophisticated trading schemes aimed at deceiving investors.
Recent Token Movements
Notably, Conor Grogan, a director at Coinbase, revealed on X (formerly Twitter) that the FBI’s wallets were unintentionally exposed. “Not sure if the FBI realized this, but they doxxed their wallets,” Grogan noted, pointing out that the wallets associated with the FBI had been involved in multiple trades. “From what I can tell, FBI-linked wallets have recently deposited to Tokenlon, Binance, Zixipay, and HTX,” he added.
The investigation exposed how the defendants manipulated the crypto market through deceptive practices. They allegedly made false claims about their tokens to attract investors and engaged in wash trading, a practice where trades are executed with the intent to deceive the market into believing there is higher activity and demand for a token. This inflated the price of tokens, allowing the fraudsters to profit by selling their holdings at the artificially boosted prices.
One of the companies involved, Saitama, at its peak, boasted a market valuation in the billions. Meanwhile, several market makers, including ZM Quant, CLS Global, and MyTrade, were accused of facilitating wash trading for NexFundAI, the very token created by the FBI as part of the investigation. Also, the SEC has joined the FBI in its probe against these suspects.