The FBI has created a cryptocurrency company and a crypto token as bait for scammers participating in pump-and-dump schemes, new reports have revealed.
The tactic, which involved making fake trades to boost prices before cashing out, worked very well: 18 people were arrested for “widespread fraud and manipulation in the cryptocurrency markets,” marking the first ever series of criminal charges against financial services companies. ‘wash trading’ and market manipulation in the cryptocurrency industry.
More than $25 million worth of cryptocurrency was seized during the operation, along with trading bots responsible for millions of dollars in wash trades for approximately 60 different cryptocurrencies, which have been deactivated.
‘Operation Token Mirrors’
The cryptocurrency the FBI created was an Ethereum-based tool called 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 cryptocurrency transactions fall under this category, so it’s no wonder police want to crack down.
“These are cases where an innovative technology – cryptocurrency – met an age-old scheme – the ‘pump and dump’. Today’s message is: If you make false statements to deceive investors, that is fraud. Period,” said Acting United States Attorney Joshua Levy.
“These allegations are also a stark reminder of how vigilant online investors need to be and that it is critical to do your homework before entering the digital frontier. People considering investing in the cryptocurrency industry should understand how these scams work so 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 for a security.
There has been a flood of bad news stories for crypto investors lately, with crypto-related cybercrime having a record year, with the inflow of stolen funds doubling to approximately $1.58 billion by 2024.
Via The registry