The FBI created a cryptocurrency as part of an investigation into price manipulation in crypto markets, the revealed government Wednesday. The ethereum-based FBI token, NexFundAI, was created with the help of “cooperating witnesses.”
As a result of the investigation, the Securities and Exchange Commission loaded three “market makers” and nine individuals for allegedly participating in schemes to increase the prices of certain cryptoassets. The Justice Department charged 18 individuals and entities with “widespread fraud and manipulation” in crypto markets.
The defendants allegedly made false claims about their tokens and executed so-called “wash trades” to create the impression of an active trading market, prosecutors claim. The three market makers (ZM Quant, CLS Global, and MyTrade) allegedly laundered trade or conspired to launder trade on behalf of NexFundAI, an ethereum-based token that they did not know had been created by the FBI.
“What the FBI uncovered in this case is essentially a new spin on old-school financial crimes,” Jodi Cohen, special agent in charge of the FBI's Boston Division, said in a statement. “What we discovered has led to charges against the leaders of four cryptocurrency companies and four cryptocurrency 'market makers' and their employees, accused of spearheading a sophisticated trading scheme that allegedly defrauded honest investors out of millions of dollars.” .
Liu Zhou, a “market maker” working with MyTradeMM, allegedly told NexFundAI promoters that MyTradeMM was better than its competitors because they “controlled the pump and dump” allowing them to “do internal trading easily.”
An FBI spokesperson crypto-market-makers-employees-with-market-manipulation-fraud/”>said Coindesk that there was limited trading activity in the coin, but did not share additional information. In a press call on Wednesday, Joshua Levy, acting U.S. attorney for the District of Massachusetts, said trading of the token was disabled, according to Coindesk.
The Department of Justice has reportedly obtained $25 million in “fraudulent proceeds” that will be returned to investors.
