The FBI has created a cryptocurrency as part of an investigation into price manipulation in crypto markets, the government announced 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 engaging in schemes to increase the prices of certain crypto assets. The Justice Department has charged 18 people and entities with “widespread fraud and manipulation” in crypto markets.
The defendants allegedly made false statements about their tokens and conducted so-called “wash trades” to create the impression of an active trading market, prosecutors allege. The three market makers – ZMQuant, CLS Global and MyTrade – allegedly laundered or conspired to launder trade on behalf of NexFundAI, an Ethereum-based token that they did not know was created by the FBI.
“What the FBI has uncovered in this case is essentially a new twist on old-school financial crime,” Jodi Cohen, special agent in charge of the FBI’s Boston Division, said in a statement. “What we uncovered has led to indictments against the leadership of four cryptocurrency companies, as well as four crypto “market makers” and their associates, who are accused of masterminding a sophisticated trading scheme that allegedly defrauded honest investors of millions of dollars .”
Liu Zhou, a “market maker” who works with MyTrade MM, reportedly told NexFundAI's promoters that MyTrade MM is better than its competitors because they “control the pump and dump” and allow them to ” simply engage in insider trading.”
An FBI spokesman said this CoinDesk that there was limited trading activity in the coin, but no additional information was shared. In a press call on Wednesday, Joshua Levy, the acting U.S. attorney for the District of Massachusetts, said trading in the token was disabled CoinDesk.
The DOJ has reportedly secured $25 million in “fraudulent proceeds” that will be returned to investors.