YEREVAN (CoinChapter.com) — On Wednesday, a judge unsealed a case brought by the Department of Justice (DOJ) against 18 individuals and companies accused of crypto market manipulation. According to the complaint, the operation targeted a multi-billion-dollar crypto firm using a fake cryptocurrency token called ‘NexFundAI’ created by the FBI.
This indictment is the DOJ’s first criminal case against financial services firms for crypto market manipulation. It follows the earlier conviction of Avraham Eisenberg in April for his role in manipulating Mango Markets, a decentralized platform.
FBI Crypto Token ‘NexFundAI’ Used to Expose Manipulation
The FBI crypto token ‘NexFundAI’ played a key role in the investigation. Jodi Cohen, the FBI’s special agent in Boston, described the creation of ‘NexFundAI’ and a fake company as an “unprecedented step” in their efforts to catch the accused.
The FBI crypto token ‘NexFundAI’ was used to approach market makers suspected of wash trading. During a meeting in September, one defendant claimed to be the “mastermind,” describing how bots manipulated trading volumes. He also requested a $2,000 upfront payment. Even as of last week, the market maker’s bots continued to generate fake trades until they were shut down by law enforcement.
Wash Trading Persists in the Crypto Industry
Moreover, market manipulation, including wash trading, remains a challenge in the crypto sector. Wash trading involves creating false demand through fake buy and sell orders, often to mislead investors. Analysts estimate that as much as 51% of trading on some platforms is artificially boosted.
The DOJ’s case focuses on three market-making firms and their employees. They are accused of providing wash trading services in exchange for payments. This case is considered “the first of its kind,” according to the DOJ, even though pump-and-dump schemes have existed for over a century.
Saitama Crypto Firm Implicated in Manipulation Scheme
Specifically, Saitama, a Massachusetts-based crypto firm, is a major focus in the case. The DOJ alleges that Saitama used market manipulation tactics to inflate its token’s market value to $7.5 billion. The indictment claims that Saitama executives secretly sold their tokens, earning tens of millions in profits. They reportedly collaborated with Gotbit, one of the market makers, to enhance trading volumes.
In addition, Gotbit has faced criticism for its practices. In 2019, a Gotbit cofounder admitted that their business was “not entirely ethical.” This collaboration between Saitama and Gotbit allegedly played a role in boosting the token’s market value.
NexFundAI Token Still Active Despite DOJ Sting Operation
Interestingly, despite the DOJ and FBI’s actions, the ‘NexFundAI’ token continued to trade. According to DEX Screener, the token’s market cap stood at approximately $237,000. Its trading activity suggests that some market participants remain unaware of the token’s background.
International Scope of the Market Manipulation Case
The indictment also has international elements. Notably, several of the defendants operated outside the U.S., with links to Portugal and Russia. Five of the accused have already entered guilty pleas or reached plea agreements.
The Securities and Exchange Commission (SEC) also filed complaints against the market-making firms.
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