https://www.theverge.com/2024/10/10/24267098/fbi-coin-crypto-token-nexgenai-sec-doj-fraud-investigation

Skip to main content
 The Verge logo.The Verge homepage

  * The Verge homepageThe Verge logo./
  * Tech/
  * Reviews/
  * Science/
  * Entertainment/
  * AI/
  * MoreMenu

 The Verge logo.
Menu

  * Tech/
  * US & World/
  * Crypto

The FBI secretly created a coin to investigate crypto pump-and-dump
schemes

The FBI secretly created a coin to investigate crypto pump-and-dump
schemes

/

NexFundAI, the FBI's Ethereum-based token, was used to investigate
price manipulation in crypto markets.

By Gaby Del Valle, a policy reporter. Her past work has focused on
immigration politics, border surveillance technologies, and the rise
of the New Right.

Oct 10, 2024, 5:58 PM UTC

Share this story

  * 
  * 
  * 

Vector collage of the FBI seal.
Image: The Verge

The FBI created a cryptocurrency as part of an investigation into
price manipulation in crypto markets, the government revealed on
Wednesday. The FBI's Ethereum-based token, NexFundAI, was created
with the help of "cooperating witnesses."

As a result of the investigation, the Securities and Exchange
Commission charged three "market makers" and nine people for
allegedly engaging in schemes to boost the prices of certain crypto
assets. The Department of Justice charged 18 people and entities for
"widespread fraud and manipulation" in crypto markets.

The defendants allegedly made false claims about their tokens and
executed so-called "wash trades" to create the impression of an
active trading market, prosecutors claim. The three market makers --
ZMQuant, CLS Global, and MyTrade -- allegedly wash traded or conspired
to wash trade on behalf of NexFundAI, an Ethereum-based token they
didn't realize was created by the FBI. 

"What the FBI uncovered in this case is essentially a new twist to
old-school financial crime," Jodi Cohen, the special agent in charge
of the FBI's Boston division, said in a statement. "What we uncovered
has resulted in charges against the leadership of four cryptocurrency
companies, and four crypto 'market makers' and their employees who
are accused of spearheading a sophisticated trading scheme that
allegedly bilked honest investors out of millions of dollars."

Liu Zhou, a "market maker" working with MyTrade MM, allegedly told
promoters of NexFundAI that MyTrade MM was better than its
competitors because they "control the pump and dump" allowing them to
"do inside trading easily."

An FBI spokesperson told CoinDesk that there was limited trading
activity on the coin but didn't share additional information. On a
Wednesday press call, Joshua Levy, the acting US attorney for the
District of Massachusetts, said trading on the token was disabled,
according to CoinDesk.

The DOJ has reportedly secured $25 million from "fraudulent proceeds"
that will be returned to investors.

Most Popular
Most Popular

 1. The bill finally comes due for Elon Musk

    -----------------------------------------------------------------
 2. The Internet Archive is under attack, with a breach revealing
    info for 31 million accounts

    -----------------------------------------------------------------
 3. Instagram and Threads moderation is out of control

    -----------------------------------------------------------------
 4. Casio supersized a classic digital watch to create this retro
    desk clock

    -----------------------------------------------------------------
 5. A closer look at Nintendo's adorable Alarmo clock

    -----------------------------------------------------------------

Verge Deals

/ Sign up for Verge Deals to get deals on products we've tested sent
to your inbox weekly.

Email (required)[                    ]Sign up
By submitting your email, you agree to our Terms and Privacy Notice.
This site is protected by reCAPTCHA and the Google Privacy Policy and
Terms of Service apply.
From our sponsor

 

 
Advertiser Content FromSponsor logo
Sponsor thumbnail

More from Tech

  * Key Speakers At The 2024 Global Aerospace SummitKey Speakers At
    The 2024 Global Aerospace Summit

    FCC chair rejects Trump's call to revoke CBS license over Harris
    interview edit

  * Two people wearing FEMA uniforms and helmets seen from behind,
    walking next to a dog.Two people wearing FEMA uniforms and
    helmets seen from behind, walking next to a dog.

    Violent threats against FEMA swirl on social media

  * marriott SHUTTERSTOCKmarriott SHUTTERSTOCK

    Marriott agrees to pay $52 million settlement after multiple data
    breaches

  * Several Garmin watches on a colorful backgroundSeveral Garmin
    watches on a colorful background

    The best Garmin watches for training and everyday life

  * 
     
    Advertiser Content FromSponsor logo

     

 The Verge logo.

  * Cookie Settings
  * Terms of Use
  * Privacy Notice
  * Cookie Policy
  * Licensing FAQ
  * Accessibility
  * Platform Status
  * How We Rate and Review Products

  * Contact
  * Tip Us
  * Community Guidelines
  * About
  * Ethics Statement

The Verge is a vox media network

  * Advertise with us
  * Jobs @ Vox Media

(c) 2024 Vox Media, LLC. All Rights Reserved