The FBI created its own crypto token to bring down crypto market manipulators. Four crypto entities and 18 individuals now face charges for wash trading and fraud.
Posted October 9, 2024 at 11:24 pm EST.
An undercover operation is hardly out of ordinary for the U.S. Federal Bureau of Investigation (FBI). However, this would be the first time the bureau has created its own crypto token in the name of justice.
An unsealed indictment on Wednesday charged firms Gotbit, CLS Global, MyTrade, ZM Quant and 18 individuals for artificially inflating the price of tokens by executing sham trades in exchange for payment.
One of those tokens was ‘NexFundAI’ — an Ethereum-based cryptocurrency created by the FBI in order to entrap crypto market manipulators. Jodi Cohen, the Special Agent in charge of the FBI’s Boston Field Office, called it an “unprecedented step.”
According to DEXScreener, the NexFundAI token is still trading with a market cap of $177,000. Trading volume for the token is up 5,000% over the last 24 hours to $3.5 million.
“This investigation, the first of its kind, identified numerous fraudsters in the cryptocurrency industry. Wash trading has long been outlawed in the financial markets, and cryptocurrency is no exception,” said Acting United States Attorney Joshua Levy said in a statement.
The FBI is urging individuals who have been impacted by trading tokens associated with the fraud to reach out, listing its own token alongside coins like Saitama, Robo Inn, VZZN and Lillian Finance.
The U.S. Securities and Exchange Commission (SEC) also brought lawsuits against Gotbit Consulting, ZM Quant Investment and CLS Global.
According to Coinbase director Conor Grogan, onchain activity shows that FBI-linked wallets have recently made several memecoin trades.
“Not sure if the FBI realized this, but they doxxed their wallets. Shortly after deployment, the wallet that seeded the FBI wallet deployed capital to multiple other wallets, making dozens of trades. FBI wallets own at least 75% of the token supply from what I can tell,” said Grogan on X.
Grogan found that FBI-linked wallets own coins like Pornrocket, EthereumMAX and BONE. It is unclear whether those coins were sent to the FBI’s linked wallet addresses by other users.
