The FBI created a cryptocurrency as part of an investigation into price manipulation in crypto markets, the government revealed Wednesday. The FBI’s Ethereum-based token, NexFundAI, was created with the help of “cooperating witnesses.”
As a result of the investigation, the Securities and Exchange Commission charged three “market makers” and nine individuals for allegedly participating in schemes to increase the prices of certain crypto assets. The Justice Department has indicted 18 individuals and entities for “widespread fraud and manipulation” in crypto markets.
The defendants allegedly made false statements regarding their tokens and executed “fictitious trades” to create the impression of an active trading market, prosecutors allege. The three market makers – ZMQuant, CLS Global and MyTrade – allegedly negotiated or conspired to wash the trade on behalf of NexFundAI, an Ethereum-based token that they did not know was created by the FBI.
“What the FBI uncovered in this case is essentially a new twist on old-fashioned financial crime,” Jodi Cohen, the special agent in charge of the FBI’s Boston division, said in a statement. “What we discovered resulted in charges against the executives of four cryptocurrency companies, as well as four cryptocurrency “market makers” and their employees, accused of running a sophisticated trading scheme that allegedly defrauded honest investors of millions of dollars.
Liu Zhou, a “market maker” working with MyTrade MM, allegedly told NexFundAI promoters that MyTrade MM was better than its competitors because they “control the pump and dump,” allowing them to “do internal trading easily.”
An FBI spokesperson said CoinDesk that there was limited commercial activity on the coin but did not share additional information. In a press call Wednesday, Joshua Levy, the acting U.S. Attorney for the District of Massachusetts, said trading in the token was disabled, according to CoinDesk.
The DOJ allegedly obtained $25 million from “fraudulent proceeds” that will be returned to investors.
