CLS Global Admits to Crypto Market Manipulation, Pays $428K in Fines and Faces US Ban

CLS Global, a financial services firm based in the UAE, has admitted to manipulating crypto markets through wash trading.

A financial services firm based in the United Arab Emirates has admitted to manipulating crypto markets through wash trading, artificially inflating trading volumes on Uniswap to create a misleading impression of market activity, the United States Justice Department announced on Friday.

As part of its settlement with the U.S. government, CLS Global will pay $428,059 in fines and asset seizures and face a permanent ban from participating in U.S. crypto markets, over criminal charges of market manipulation and wire fraud.

The FBI investigation uncovered CLS Global’s involvement in wash trading, a deceptive practice that inflates trading volumes to mislead investors, as part of a scheme to defraud crypto exchanges.

In an undercover operation, the Federal Bureau of Investigation created a fake crypto business, NexFundAI, to expose the firm’s fraudulent activities.

NexFundAI hired CLS Global to help its token meet the trading volume requirements for listing on a crypto exchange. During a mid-2024 meeting, a CLS Global employee explained how the firm’s algorithms created the illusion of organic trading.

Though they acknowledged it was wash trading, the employee downplayed the ethical concerns, the FBI said in court filings.

The company's operations involved simultaneously buying and selling the same assets, ensuring no real market risk. This deceptive method attracted investors by showing inflated activity levels on platforms like Uniswap.

U.S. authorities charged the company with conspiracy to commit market manipulation and wire fraud. The U.S. Attorney’s Office in Boston announced the criminal charges, while the Securities and Exchange Commission filed civil enforcement charges for securities law violations.

CLS Global offered its market-making services to U.S. investors through its website and promotional materials, the Justice Department said. Despite being located in the United Arab Emirates, the firm's operations targeted the U.S. crypto market, leading to the charges.

The SEC reached a separate resolution with CLS Global related to these violations, the Justice Department said. This enforcement action highlights regulatory efforts to curb fraudulent activities in the growing cryptocurrency sector.