- FBI uncovered an alleged crypto scheme by 8 individuals and four major crypto firms
- FBI launched its token NexFundAI to obtain data and uncover wash trading manipulation
- Gotbit, ZM Quant, CLS Global, Gotbit, and MyTrade were among the largest companies involved.
- The FBI seized more than $25 million in cryptocurrency and deactivated trading bots
- Participants could face up to 20 years in prison for market manipulation and other charges
The FBI uncovered an alleged crypto scheme of unprecedented scale involving 18 individuals and four major crypto firms.
FBI used their Ethereum-based token NexFundAI and found that participants engaged in wash trading and other deceptive tactics that allowed them to pump up the value of more than 60 crypto assets artificially.
According to the investigation, the alleged participants in the scheme included major companies such as Gotbit, ZM Quant, CLS Global, Gotbit, and MyTrade and all those involved could face up to 20 years in prison on charges from the Boston federal court.
Details of the FBI Investigation
To uncover the manipulation, the FBI created and launched their Ethereum-based token NexFundAI, on the movement data from which they were able to draw many conclusions.
This revealed that many companies and individuals, among other tactics to manipulate asset prices, were engaging in wash trading, the essence of which is that the same company sells and buys a token, creating a pseudo demand for it, as well as increasing the capitalization of the company behind it. This forces other investors to invest in the token and the company while the manipulators doing the manipulating earn their share of the market manipulation.
Jodi Cohen, an FBI Special Agent in charge of the Boston Division said it was “unprecedented” and was meant to “identify, disrupt, and bring these alleged fraudsters to justice.”
According to the investigation, more than 60 crypto assets on the market were subjected to this, including the notorious Saitama, which jumped to “multi-billion-dollar market value”.
According to the document Boston federal court among the largest companies involved are CLS Global, and MyTrade, as well as market makers like ZM Quant and Gotbit who were hired to sham trades using multiple wallets and bots.
They could now face up to 20 years, as price manipulation is only one of the main charges, given that the SEC has already filed civil complaints alleging securities law violations “with respect to conduct at Gotbit, CLS, ZM Quant, Saitama, and Robo Inu.”
The FBI seized more than $25 million in cryptocurrency and deactivated trading bots responsible for millions of transactions, also some of the defendants pleaded guilty and one of them even commented on the activities as finding cryptocurrency buyers to make them “lose money to make a profit.”
Assistant US Attorney Joshua Levy said
“These charges are also a stark reminder of how vigilant online investors must be and that doing your homework before diving into the digital frontier is critical. People considering making investments in the cryptocurrency industry should understand how these scams work so that they can protect themselves.”
Conclusion
This kind of malicious market manipulation that misleads investors and harms the industry and its reputation – really needs to be eliminated, and the FBI has shown good results in this case.
Also, Joshua Levy’s comment seems to be the best conclusion and admonition, which we also often repeat, that one should always remain vigilant, evaluate everything critically, and make informed decisions.
