FBI launches fake crypto token to nab criminals
The Federal Bureau of Investigation (FBI) launched a fake crypto token that helped detain 18 crypto criminals. The sting operation involved the creation of ‘The NexFundAI Token’ by the FBI to trick the fraudsters into offering their services.
The FBI disguised itself as a crypto company and created fake Etherum-based token, which helped lure four major market makers, including Gotbit, CLS Global, MyTrade, and ZM Quant that were charged by the US federal prosecutors. These firms artificially inflated the price of tokens by executing fake trades in exchange for payments.
Acting United States Attorney Joshua Levy said this case was the first of its kind operation and identified numerous fraudsters in the industry. He said, “These are cases where an innovative technology – cryptocurrency – met a century-old scheme – the pump and dump. The message today is if you make false statements to trick investors, that’s fraud. Period. Our office will aggressively pursue fraud, including in the cryptocurrency industry.”
Pump and dump
The ‘pump and dump’ and ‘wash trading’ methods boost the perceived trading volumes of token to imply they are more popular than they actually are. Wash trading involves placing fake buy and sell orders.
Investors were made to believe they were purchasing valuable tokens due to the wash trading method. The fraudsters later sell these tokens for inflated prices, making huge profits.
The FBI said that the Securities and Exchange Commission (SEC) has filed civil complaints against the companies involved in the sting operation on grounds of violation of securities law related to their conduct.
Press release shared by the SEC said, “The SEC appreciates the assistance of the FBI and the United States Attorney’s Office for the District of Massachusetts, which today announced parallel criminal actions.”
The FBI has set up a team to contact the victims of NexFundAI and other tokens linked to it and seek assistance. Filling out the form will make the person eligible for services like restitution, and legal protections under federal and state law.
The crypto community was abuzz with opinions on the matter, with many praising the approach. Many cautioned the potential fraudsters to beware as the agency is now technologically savvy enough to catch them.
