The FBI made a token to trick scammers as market manipulation bedevils crypto
Undercover coins… The Department of Justice charged 18 people and companies following an FBI investigation into what authorities called a “wash trading” and “pump and dump” scheme. In an undercover op, the bureau created its own fake crypto biz along with a real ethereum-based token dubbed “NexfundAI.” The DOJ said three market makers — ZM Quant, CLS Global, and MyTrade — wash-traded (or conspired to wash-trade) the NexfundAI token on behalf of the FBI’s bogus biz.
Spin cycle: Wash trading — trading an asset back and forth, often with bots and on a massive scale — is an illegal form of market manipulation.
Not so clean: It’s been used to artificially inflate the price of coins and NFTs, generate trading rebates, and boost trading volume on exchanges.
FBI fans: NexfundAI token-trading volume is said to have surged 5,000% after the DOJ revealed that the feds were behind it.
Heavy duty… Wash trading’s long been a problem in crypto. A report said that in the three years up to September 2023, there was at least $2B in wash trading on ethereum decentralized exchanges. It’s not just an ETH problem: one researcher said a majority of July’s decentralized exchange volumes on Solana may’ve been inorganic (think: bots, wash trading).
Crypto’s still in cleanup mode… Since FTX, the industry’s worked to shed its shady rep. DOJ charges of market manipulation for hire don’t help. Still, crypto’s made a push to move into the mainstream. Picture: $190M+ given to crypto-friendly PACs and candidates ahead of the US elections, spot bitcoin ETFs boasting a $57B market cap, and an embrace of regulation.