Originally published on: October 11, 2024
The Federal Bureau of Investigation (FBI) recently unveiled a groundbreaking operation where they utilized a phony artificial intelligence fund cryptocurrency to apprehend alleged fraudsters involved in market manipulation. Referred to as “NexFundAI (NEXF),” this fabricated coin was promoted as a crypto security representing shares in an AI-centric fund.
In an indictment filed on October 7 in Massachusetts Federal District Court, the FBI detailed how scammers were approached by the agency with a request to manipulate the trading volume of the token. This deceptive tactic aimed to mislead investors into believing in the popularity of the coin.
As the scammers agreed to assist in the fraudulent scheme, the FBI gathered incriminating evidence culminating in indictments against them. This marked the first instance of the FBI acknowledging the creation of a cryptocurrency as part of their investigations and the first time they pressed charges against a crypto market maker for price manipulation.
The prevalence of price manipulation allegations in the crypto market has been a recurring issue. In July 2024, the FBI uncovered MyTrade MM, a crypto market-making firm that purportedly offered volume support services to token issuers on their website.
This revelation led undercover FBI officers to engage with the team at crypto exchange LBank on August 20, revealing MyTrade as their market maker. Discussions with MyTrade’s founder, Liu Zhou, shed light on the firm’s employment of wash trading to artificially boost volume, inducing unwitting investors to purchase coins devoid of authentic interest.
The launch of the NexFundAI token on LBank around October 2 saw MyTrade MM executing millions of dollars’ worth of wash trades for approximately 60 clients, as indicated in the indictment.
Subsequently, Zhou and two collaborators were charged with conspiracy to commit market manipulation and wire fraud, offenses that carry a penalty of up to five years in prison. Zhou’s decision to plead guilty signifies a significant development in the case, as announced by the United States Department of Justice (DOJ).
While the intrigue surrounding the specific identity of the fraudulent token persists, with speculations and claims circulating within the crypto community, the FBI sting operation highlights the agency’s proactive stance against fraudulent activities in the digital asset realm.
**Discover how the FBI deployed a fake cryptocurrency to crack down on crypto fraudsters in this gripping account of an undercover operation that unmasked market manipulation.**
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