The FBI created its own cryptocurrency so it could watch suspected fraudsters use it. The idea worked so well that it resulted in arrests in three countries.
The news about the Fed's currency, an Ethereum-based financial product named NexFundAI, comes after the Department of Justice announced Wednesday that 18 people have been charged “with widespread fraud and manipulation in the virtual currency markets.”
The Fed alleges that part of the fraud involved “wash trades,” or trades made for the sole purpose of increasing trading volume in securities or other assets. An increase in trading volume is often seen as an indicator of increased interest in a stock due to favorable growth prospects, which could indicate an increase in price. However, wash trading is often conducted by related or even the same entity to create false market signals, an arrangement also known as a “pump-and-dump.”
Or, as the U.S. Securities and Exchange Commission has stated, the alleged scheme “aims to induce victim investors to purchase crypto assets by creating the appearance of an active trading market.” “I'm here.”
Whatever you call this behavior, the people behind it want the price of the asset to rise by more than they paid for it. They then sell their holdings for a profit.
One of the organizations in this case, Saita, created its own token. The company's management stated, “Saitama's business plan was reviewed by regulators, the Saitama tokens owned by management were not sold, and the Saitama tokens were encrypted in a way that prevented market manipulation. He is said to have made various false public announcements.
However, the indictment alleges that “In reality, the Saitama Prefecture leadership actively manipulated the Saitama token market and secretly sold Saitama tokens to generate tens of millions of dollars in profits.''
The concept, a shell company creating and promoting its own cryptocurrency, was adopted by the FBI, and a company and coin named NexFundAI was established.
The Justice Department alleges that the defendants conspired to launder trade on behalf of NexFundAI, but of course the Fed was in a privileged position to monitor everything.
“The FBI is taking the unprecedented step of creating its own cryptocurrency token and company to identify, disrupt, and bring these fraud suspects to justice,” said Jodi Cohen, Special Agent in Charge of the FBI's Boston Division. “We have taken the following measures.”
“What the FBI uncovered in this case is essentially a new twist on an old-fashioned financial crime,” he added.
And because these are old-school crimes, the U.S. Securities and Exchange Commission has announced charges against five “crypto asset promoters.”
“Today's enforcement actions demonstrate once again that retail investors are being victimized by institutional fraud in the crypto markets,” explained Sanjay Wadhwa, Deputy Director of the SEC's Division of Enforcement. “As so-called promoters and self-appointed market makers collude to target retail investors with false promises of profiting from the crypto market, investors are left with no idea what they are doing against them. It should be noted that there is a possibility of stacking.
This week, arrests were made in the UK, Portugal and Texas of people allegedly involved in these schemes. Four defendants have already pleaded guilty, and one more intends to plead guilty. ®
