The Federal Bureau of Investigation (FBI) has successfully dismantled a major wash trading operation in the cryptocurrency sector. According to the U.S. Department of Justice (DOJ), the ring involved four cryptocurrency companies, four market makers, and their employees. The group conspired to deceive crypto users and steal millions through fraudulent trading.
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FBI’s Undercover Operation Reveals Fraud
Kaiko Research, a prominent crypto data analysis firm, provided insight into how the FBI meticulously tracked down the suspects. In a creative approach, the FBI established a decentralized finance (DeFi) company called NexFundAI. It also launched a native token through this fake firm, where it was easily tracking funds and the culprits involved. As Kaiko claims, the FBI research unveiled a complex wash trading fraud: the tokens from NexFundAI were transferred to the market makers’ wallets and further shifted from one wallet to another. The funds were then used for wash trading on Uniswap, the token’s only secondary market.
This tactic enabled the fraudsters to create the illusion of active trading, artificially inflating the token’s value. Investors drowned themselves into buying these tokens, believing they were making suitable investments. After the tokens had appreciated, the conspirators sold their stakes at the highest bid, leaving investors penniless.
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18 Individuals Charged in the Scheme
The FBI’s investigation identified 18 individuals involved in the pump-and-dump Scheme, with the DOJ revealing that four suspects have already pleaded guilty and another agreeing to follow suit. Three more suspects in Texas, the United Kingdom, and Portugal were arrested, as well as more than $25 million in cryptocurrency were detained.
The DOJ also shut down several trading bots that were reportedly used to execute millions of dollars in wash trades across more than 60 cryptocurrencies. DOJ’s report identifies the platform Saitama as the major one used in conducting fraud. It also named three’ market makers’ – ZM Quant Limited,- CLS Services Limited, and MyTrade – with employees involved in the crime.
Conclusion
As the FBI shuts down this crypto wash trading ring, the crypto market is closer to eradicating fraud. While further investigations are ongoing, the operation is a message to the public that authorities are actively pursuing crypto criminals.
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Maxwell Mutuma
Maxwell is a crypto-economic analyst and Blockchain enthusiast, passionate about helping people understand the potential of decentralized technology. He writes extensively on topics such as blockchain, cryptocurrency, tokens, and more for top publications such as Coingape, Coin Edition, and The Coin Republic. His goal is to spread knowledge about this revolutionary technology and its implications for economic freedom and social good.