An FBI sting operation called Operation Token Mirrors used a fake crypto project, NexFundAI, to expose wash trading by three market makers: ZM Quant, CLS Global, and MyTrade.
In 2024, the Federal Bureau of Investigation (FBI) conducted a sting operation named Operation Token Mirrors to expose and gather evidence of wash trading by three market makers: ZM Quant, CLS Global, and MyTrade. The operation involved setting up a fake crypto project called NexFundAI and monitoring its trading activity. Blockchain research firm Kaiko later analyzed the on-chain data, confirming the FBI’s findings and revealing the extent of the manipulation.
According to the FBI, NexFundAI was created in May and listed on Uniswap, where the market makers used bots and hundreds of wallets to create the illusion of trading activity. Kaiko’s analysis of the on-chain data revealed that the buying and selling volumes were symmetrical, indicating that the firms were simply offsetting trades to artificially inflate volume.
Kaiko stated that its analysis focused on the NexFundAI cryptocurrency and its trading activity, specifically examining the patterns created by the firms and individuals involved in wash trading. The firm’s findings, as reported by CoinEdition, "reinforce information uncovered by the FBI through its undercover ‘sting’ operation.”
NexFundAI was only available on Uniswap, which allowed Kaiko to examine the secondary market data and calculate the aggregate volume for the cryptocurrency on this market. The firm found symmetry between the buying and selling volumes, suggesting that manipulation was widespread.
Kaiko noted that the symmetry in buying and selling volumes indicated that the market-making companies were "offsetting a total amount across all wallets engaged in wash trading on this market each day.”
The FBI had created the NexFundAI crypto and made it appear like a legitimate project to attract market manipulators, ultimately leading to the arrest and indictment of 18 individuals, as announced on October 9. Acting United States Attorney Joshua Levy warned scammers that making false statements to trick investors is considered fraud and that the US Attorney’s office will "aggressively pursue fraud.”
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