Cyber Crime
FBI Unveils Fake Cryptocurrency to Crack Down on Massive Crypto Market Manipulation
The U.S. Department of Justice (DoJ) has announced a series of arrests and charges against several individuals and organizations involved in alleged manipulation of digital asset markets as part of a far-reaching fraud investigation.
The operation, codenamed *Operation Token Mirrors, saw the FBI take the unusual step of creating its own cryptocurrency and company, named NexFundAI. The FBI designed NexFundAI as part of a covert operation aimed at exposing fraudulent activities in the cryptocurrency space.
NexFundAI was presented as a project that combined the fields of finance and artificial intelligence, claiming its token would not only serve as a secure store of value but also drive positive changes in AI-related fields. The operation led to charges against three market makers—ZM Quant, CLS Global, and MyTrade—and their employees for allegedly engaging in illegal practices such as wash trading, in which they manipulated trading volumes for NexFundAI.
Another market maker, Gotbit, along with its CEO and two directors, has also been charged with similar offenses. In total, 18 individuals and entities have been implicated in the investigation, with five defendants either pleading guilty or agreeing to do so. Arrests have been made in the U.S., the U.K., and Portugal.
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Authorities have seized over $25 million in cryptocurrency, and multiple trading bots that were being used to carry out wash trading across approximately 60 different cryptocurrencies have been deactivated. Wash trading refers to the unlawful practice of artificially inflating trading activity by repeatedly buying and selling the same assets to mislead potential investors.
Court filings reveal that the defendants carried out fraudulent trades to make their tokens appear as valuable investments, ultimately boosting their market prices. Once the prices rose, they executed a “pump-and-dump” scheme by selling their tokens at inflated prices to earn illicit profits.
Among those charged are:
- Aleksei Andriunin, Fedor Kedrov, Qawi Jalili, and Gotbit Consulting LLC (Gotbit)
- Riqui Liu, Baijun Ou, and ZM Quant Investment LTD (ZM Quant)
- Andrey Zhorzhes and CLS Global FZC, LLC (CLS)
- Liu Zhou of MyTrade MM
- Manpreet Kohli, Haroon Mohsini, Nam Tran, Max Hernandez, Russell Armand, Vy Pham, and Saitama LLC (Saitama)
- Robo Inu Finance (Robo Inu)
- Michael Thompson of VZZN
- Bradley Beatty of Lillian Finance LLC (Lillian Finance)
The U.S. Securities and Exchange Commission (SEC) emphasized the significance of the operation, with Deputy Director of Enforcement Sanjay Wadhwa stating, “These actions once again demonstrate that retail investors are being preyed upon by fraudulent actors in the crypto markets. Investors need to be aware that the playing field may be rigged by those who make false promises of profit.”