The FBI created a cryptocurrency company and crypto token as a bait for scammers who participate in ‘pump-and-dump’ schemes, new reports have revealed.
The tactic, which involve making fake trades to boost prices before cashing out, worked very well, with 18 people arrested for ‘widespread fraud and manipulation in the crypto currency markets’, marking the first ever set of criminal charges brought against financial service firms for ‘wash trading’ and market manipulation in the cryptocurrency industry.
Over $25 million in cryptocurrency was seized during the operation, along with trading bots responsible for millions of dollars worth of ‘wash trades’ for around 60 different cryptocurrencies, which have been deactivated.
‘Operation Token Mirrors’
The cryptocurrency the FBI created was an Ethereum-based instrument named NexFundAI, which they used to track unsuspecting traders.
‘Wash trades’ refers to the illegal process of buying and selling the same security as a form of market manipulation. Recent reports suggest that as much as 70% of all crypto currency transactions fall under this category, so it’s no wonder police want to crack down.
“These are cases where an innovative technology – cryptocurrency – met a century old scheme – the pump and dump. The message today is, if you make false statements to trick investors, that’s fraud. Period.” stated Acting United States Attorney Joshua Levy.
“These charges are also a stark reminder of how vigilant online investors must be and that doing your homework before diving into the digital frontier is critical. People considering making investments in the cryptocurrency industry should understand how these scams work so that they can protect themselves.” he adds.
Also charged by the Security and Exchange Commission were three ‘market makers’, which refers to individuals who engage in two-sided markets of a security.
There’s been a flurry of bad news stories for crypto investors recently, with crypto-linked cybercrime seeing a record year, with stolen funds inflows doubling to around $1.58billion in 2024.
Via The Register