A crypto firm has pleaded guilty in a United States court to having manipulating the market of a token created by the Federal Bureau of Investigations (FBI.)
A Jan. 21 plea deal revealed that CLS Global, based in the United Arab Emirates, had pled guilty to two counts of fraudulent manipulation of trading volumes and wire fraud. The United States’ Massachusetts District Attorney’s Office announced that the company would pay a $428,049 fine and forfeit all the funds it holds in multiple Binance and KuCoin crypto exchange accounts.
The details
Wash trading is a form of market manipulation in which a manipulator buys and sells the same asset, often through multiple accounts or brokers. The goal is to create the illusion of heightened trading activity and attract the attention of market participants.
Since the trades essentially cancel each other out, no real transfer of ownership takes place, market observers are misled pertaining to the true level of demand for the asset. This practice often inflates trading volume further or leads to prices ballooning and is considered illegal in many jurisdictions.
CLS Global was charged in September 2024 after the company was snared by an FBI-made AI token, NexFundAI (NEXF). The token was purposely designed to attract the attention of those engaged in market manipulation, with a focus on pump-and-dump schemes.
At the time, the FBI pretended to be scammers looking for help in manipulating the token’s trading volume to attract investment by faking market activity. The plea deal required CLS Global to admit its involvement in providing services including wash trading for the token in a bid to fraudulently mislead investors to buy it.
Furthermore, the company is now prohibited from participating in cryptocurrency transactions on platforms that allow United States citizens. The firm was also placed on probation for the next three years and will have to make annual certifications to the Securities and Exchange Commission to attest that it is adhering to the imposed rules.