FBI Designs Cryptocurrency to Entice Pump-and-Dump Scheme Perpetrators
Here's a rewritten version of the supplied article:
FBI's Fake Cryptocurrency Sting Nabs 18 Crooks
The Federal Bureau of Investigation (FBI) set up its own cryptocurrency company and token, dubbed NexFundAI, to bag fraudsters who engaged in fraudulent trades for boosting prices before cashing out, according to a press release from the U.S. Department of Justice. This blockbuster operation, named Operation Token Mirrors, marked a trailblazing attempt in the crypto sphere, leading to the indictment of 18 individuals and entities for their suspected nefarious activities.
The fraudsters allegedly availed themselves of services from three crypto firms – ZM Quant, CLS Global, and MyTrade – for conducting bogus trades with NexFundAI and over 60 other coins. Another firm, Gotbit, kept up similar trading practices, only this time excluding the FBI token. According to the Department of Justice, the bots behind these sham trades have been deactivated, with the authorities seizing a whopping $35 million worth of cryptocurrency.
The NexFundAI website, constructed on the Ethereum blockchain, looked no different from ordinary crypto sites sprouting daily. However, a banner currently reads: "This website was created at the direction of the Federal Bureau of Investigation as part of an investigation into cryptocurrency fraud and market manipulation. For more information, click here." The link leads to the DOJ press release announcing the indictments.
The indictments also include private conversations between the alleged miscreants on Telegram and WhatsApp, filled with memes and GIFs. One of the accused, Andrey Zhorzhes of CLS Global, unwittingly engaged with the FBI (under the disguise of NexFundAI) in a video chat, where he detailed the workings of his company's services:
- "What we can help with is volume creation. We can help with volume generation so you guys are able to meet exchange requirements, if you are applying for a tier 1 exchange."
- "We have an algorithm that ... basically does self-trades, buying, and selling, and the only expenses you have are the gas fee and the exchange fee."
- "We do that from multiple wallets so it's not visible ... it looks like organic buying and selling that is happening ... so it does not look like an algorithm is trading, because if it is obvious, then it doesn't make much sense."
- "The idea of volume generation is creating some volume on the decentralized exchange so the token looks organic and looks live and people get interested in trading it."
- "We do that by transferring the funds into multiple wallets, that could be as many as you guys wish . . . from which we do the buying and selling . . . and generate some desired number for you. We decide some number we wish to generate per day . . . can be 100,200,300k, doesn't matter, and then we generate these number[s]... on a 24-hour timeframe."
- "It's very hard to track.... We've been doing that for many clients."
- "I know that it's wash trading and I know people might not be happy about it."
"The FBI's Operation Token Mirrors uncovered a fresh breed of old-school financial deceit," said Jodi Cohen, Special Agent in Charge of the FBI's Boston Division, in a press release. "These charges targeted malicious token developers, promoters, and market manipulators involved in the crypto space."
She continued, "'With Operation Token Mirrors,' the FBI made an unprecedented move into the crypto world to identify, disrupt, and root out these alleged swindlers."
As of this release, four defendants have pleaded guilty, while another has agreed to do so. This week, authorities have apprehended three other defendants in Texas, the UK, and Portugal.
The names of those charged are:
- Aleksei Andriunin, Fedor Kedrov, Qawi Jalili, Gotbit Consulting LLC (Gotbit)
- Riqui Liu, Baijun Ou, ZM Quant Investment LTD (ZM Quant)
- Andrey Zhorzhes, CLS Global FZC, LLC (CLS)
- Liu Zhou, MyTrade MM
- Manpreet Kohli, Haroon Mohsini, Nam Tran, Max Hernandez, Russell Armand, Vy Pham, Saitama LLC (Saitama)
- Robo Inu Finance (Robo Inu)
- Michael Thompson, VZZN
- Bradley Beatty, Lillian Finance LLC (Lillian Finance)
It remains to be seen whether these charges will serve as a deterrent for future con artists in the crypto realm. On the day of the indictments, a flood of new NexFundAI tokens surfaced on DexScreener.
Crypto enthusiasts have been taking to social media, arguing that it's ludicrous for the FBI to create a scam token only to advise those victimized by that same scam to seek help from the FBI. However, victims are encouraged to contact the FBI if they bought or sold tokens from the accused companies, including the FBI's own token.
- The FBI, through Operation Token Mirrors, created a cryptocurrency company and token named NexFundAI to catch individuals engaged in fraudulent trades that involved boosting prices before cashing out.
- The FBI's NexFundAI was used in conjunction with over 60 other coins in fraudulent trades conducted by three crypto firms: ZM Quant, CLS Global, and MyTrade, as well as another firm, Gotbit, which excluded the FBI token.
- A conversation between one of the accused, Andrey Zhorzhes, and the FBI (disguised as NexFundAI) revealed that the company's services included generating volume for cryptocurrency trades, by transferring funds into multiple wallets and making trades to create a desired number of tokens within a 24-hour timeframe.
- Following the indictments, new NexFundAI tokens emerged on DexScreener, sparking debate among crypto enthusiasts about the FBI's creation of a scam token and its subsequent advice for victims to seek help from the agency.
