FBI Creates Fake Cryptocurrency to Expose Massive Crypto Market Manipulation
The U.S. Department of Justice (DoJ) has announced the culmination of Operation Token Mirrors, an extensive sting operation aimed at uncovering fraud in the digital asset markets. The investigation involved the Federal Bureau of Investigation (FBI) taking the unprecedented step of creating a fake cryptocurrency and company, NexFundAI, to expose widespread crypto market manipulation.
NexFundAI: The Bait for Market Manipulators
NexFundAI was marketed as a cutting-edge cryptocurrency blending finance and artificial intelligence (AI). According to its website, the project aimed to serve as a secure store of value while also claiming to drive innovation in the AI sector. However, the token and the company were entirely fabricated by law enforcement to lure market manipulators into fraudulent activities.
Through NexFundAI, the FBI was able to catch individuals and entities engaging in illegal trading practices, such as wash trading — where the same financial instruments are bought and sold to artificially boost trading volumes — and pump-and-dump schemes, where token prices are fraudulently inflated to attract unsuspecting investors before being dumped for profit.
Fraudsters Caught in Operation Token Mirrors
As a result of the sting operation, 18 individuals and entities have been charged. These include high-profile market makers and their employees:
- ZM Quant Investment LTD
- CLS Global FZC, LLC
- MyTrade MM
- Gotbit Consulting LLC, and its CEO and directors
- Saitama LLC
- Robo Inu Finance
- Lillian Finance LLC
The defendants are accused of executing fraudulent trades to inflate the value of their tokens, misrepresenting them as lucrative investments to attract retail investors.
Also read: Crypto Fraudster Horst Jicha on the Run After Skipping $5 Million Bond Backlash
A Closer Look at Wash Trading and Pump-and-Dump Schemes
The court documents detail how the defendants used their own cryptocurrency tokens to create bogus trades and manipulate the market. By artificially inflating the value of these tokens, they misled new investors, creating a false sense of demand. Once prices spiked, the manipulators sold off their tokens, resulting in significant profits through illegal means.
As part of the investigation, more than $25 million in cryptocurrency was seized, and multiple trading bots used to facilitate wash trading for over 60 different cryptocurrencies were disabled.
Key Arrests and Charges
Among the individuals facing charges by the FBI are:
- Aleksei Andriunin, Fedor Kedrov, and Qawi Jalili from Gotbit Consulting LLC
- Riqui Liu and Baijun Ou from ZM Quant Investment LTD
- Andrey Zhorzhes from CLS Global FZC, LLC
- Liu Zhou from MyTrade MM
- Michael Thompson from VZZN
- Bradley Beatty from Lillian Finance LLC
Several defendants have already pleaded guilty or agreed to plead guilty, while three others were arrested in the United States, the United Kingdom, and Portugal.
SEC Warns Retail Investors to Stay Cautious
Sanjay Wadhwa, deputy director of the SEC’s Division of Enforcement, warned retail investors of the dangers posed by fraudulent market activity in the cryptocurrency sector. He emphasized that “purported promoters and self-anointed market makers” often target the public with false promises of profit, while manipulating the markets for their personal gain.
The FBI operation shows how retail investors are frequently victimized by deceptive practices in the crypto space, and highlights the ongoing risks of market manipulation.
The FBI’s innovative use of a fake cryptocurrency, NexFundAI, in Operation Token Mirrors has now opened up a new chapter in law enforcement’s fight against crypto fraud. The arrests and charges send a strong message to bad actors in the digital asset markets, while warning investors to be wary of schemes that promise unrealistic returns.
