In a bold move, the FBI has created its own cryptocurrency, NexFundAI, to combat rampant market manipulation in the crypto industry. This innovative strategy was unveiled as the Department of Justice (DOJ) unsealed a major criminal case against 18 individuals and companies accused of artificially inflating token prices.
This unprecedented action marks the DOJ's first prosecution targeting financial services firms for crypto market manipulation. The case follows the conviction of Avraham Eisenberg for rigging the Mango Markets platform earlier this year.
The FBI's investigation, described by special agent Jodi Cohen as “unprecedented,” involved setting up a fake company alongside the new token, #NexFundAI which operates on the Ethereum blockchain. Through this setup, agents engaged directly with alleged market manipulators, one of whom claimed to be the “mastermind” behind wash trading schemes designed to create false trading volume.
Wash trading, a deceptive practice where participants fabricate buy and sell orders, has plagued the crypto space, with analysts estimating that up to 50% of trading may be artificially inflated, particularly on offshore exchanges. The DOJ's indictment focuses on three market makers and their employees, who allegedly offered wash trading services for a fee.
Key players in this scheme included the Massachusetts-based crypto firm Saitama, which reportedly collaborated with market maker Gotbit to inflate its token's market value to $7.5 billion. Executives from Saitama are accused of profiting tens of millions by secretly selling their inflated tokens.
Several defendants have already pleaded guilty, and the SEC has also filed civil complaints against these market-making operations. As the crackdown continues, NexFundAI remains active with a market cap around $237,000, illustrating the ongoing complexities of the crypto landscape.
