The sting operation ensnared financial and cryptocurrency firms across the country
The FBI recently netted 16 individuals in a groundbreaking sting operation by creating a fake cryptocurrency to catch fraudsters involved in market manipulation. The US government unsealed charges in Boston, accusing leaders from four cryptocurrency firms and four financial service companies of orchestrating large-scale fraud.
These companies, known as “market makers,” allegedly engaged in wash trading, a practice of manipulating prices through sham transactions to artificially inflate the value of various crypto tokens. The scam involved a “pump and dump” scheme where the accused manipulated the market by driving up token prices and then selling off their holdings at inflated values, leaving unsuspecting buyers with worthless assets. The scheme affected around 60 different tokens, and authorities have already seized over $25 million in cryptocurrency.
One of the largest companies implicated in the scandal, Saitama, had once reached a market valuation in the billions before the fraud was uncovered. Some defendants have already pleaded guilty, while others have been apprehended in different countries, including the UK and Portugal.
Central to the operation was NexFundAI, a fake cryptocurrency and token set up by the FBI to infiltrate the fraudulent market. Unaware they were dealing with an FBI setup, the alleged fraudsters used the fake crypto to carry out their schemes. This is the first time that law enforcement has created its own cryptocurrency to catch criminals in the industry.
Acting US Attorney Joshua Levy emphasized the importance of vigilance in the crypto market, reminding investors to be cautious and do thorough research. Special Agent Jodi Cohen highlighted how this case represents a new twist on old financial crimes, with the FBI taking unprecedented steps to bring fraudsters to justice.
