SEC Sting Bars UAE Crypto Market Maker CLS Global for 98% Wash Trades, $425K Fine

Hassan, a Cryptonews.com journalist with 6+ years of experience in Web3 journalism, brings deep knowledge across Crypto, Web3 Gaming, NFTs, and Play-to-Earn sectors.

The U.S. Securities and Exchange Commission (SEC) has secured a final judgment in its market manipulation case against CLS Global FZC LLC, a UAE-based crypto market maker. The ruling, issued by the U.S. District Court for the District of Massachusetts on April 7, 2025, concludes a closely watched case involving fraudulent trading practices in the digital asset market.

CLS Global, which describes itself as a crypto asset market maker, was accused by the SEC of orchestrating a scheme to manipulate the market for a crypto asset known as “NexFundAI.” The SEC alleged that the firm created a false appearance of active trading to mislead retail investors into believing there was real market demand for the token, an asset the agency classified as a security.

According to the SEC, CLS Global’s trades accounted for approximately 98% of NexFundAI’s total trading volume during the relevant period. These trades, which were executed on Uniswap, a decentralized exchange, were intended to inflate volume and deceive investors.

The final judgment, which CLS Global consented to without admitting or denying the allegations, includes an injunction prohibiting future violations of U.S. securities laws. The firm must pay a $425,000 civil penalty, disgorge $3,000 in profits, and pay $80.39 in prejudgment interest. The ruling also bans CLS Global from conducting business with U.S. persons or entities and requires the company to implement new client screening procedures within 30 days.

This civil resolution follows CLS Global’s guilty plea in a parallel criminal case, announced in January 2025, led by the U.S. Department of Justice. In that case, the FBI revealed it had created NexFundAI as a “trap token” designed to expose fraudulent market-making activity. CLS Global was among several firms caught manipulating trading volumes during the sting operation.

“With this final judgment, the SEC reinforces its commitment to holding market manipulators accountable and protecting investors from deceptive practices,” said David D’Addio, one of the SEC attorneys involved in the case.

The case is seen as a major regulatory victory in the broader crackdown on crypto-related fraud. It also indicates the increasing use of advanced enforcement tactics, such as trap tokens, to detect and deter misconduct in decentralized finance markets.

The SEC’s charges against CLS Global and its employee, Andrey Zhorzhes, were filed in October 2024. The agency's complaint, which serves as a point of contention in the broader crypto regulatory landscape, alleged that the crypto market maker's actions in manipulating the price and volume of NexFundAI spanned several months in 2023.

Prosecutors contend that CLS's manipulation was not a one-off incident, but rather part of a larger trend in crypto markets. A January 2025 Chainalysis report estimates that more than $2.6 billion in annual wash trading occurs, roughly 2% of total daily crypto volumes, according to CoinGecko.

Market makers, meant to provide liquidity and stabilize prices, have come under increasing scrutiny. While CLS positioned itself as a gap-filler in crypto market-making, regulators argue that some firms are misusing the role to distort markets.

Recent history supports those concerns. Celsius executives were accused in 2023 of using Wintermute to prop up the value of their token. In 2024, Binance also dismissed an employee who had flagged possible manipulation by DWF Labs, allegedly tied to $300 million in pump-and-dump activity involving tokens such as $YGG.

The issue isn’t isolated to trading firms alone; earlier this year, the CFTC secured a $130 million judgment against the founders of EmpiresX for running a fraudulent investment scheme, adding to the intensifying regulatory focus on market abuse in the crypto sector.

This case has several key implications:

* It exposes how easily trading bots and algorithms can be used to fake activity on decentralized markets, making vigilance and transparency essential for both platforms and users.

* Yes, stricter compliance and screening requirements may push firms to reassess their cross-border operations and client vetting, particularly when serving U.S. or other regulated markets.

* It shows the importance of skepticism toward artificial trading volume and the need for due diligence, as old financial fraud tactics are being repackaged for the digital age.

* As crypto markets span borders, the CLS Global case could inspire more coordinated global crackdowns on manipulation.