The FBI has secretly created an Ethereum-based cryptocurrency called NexFundAI as part of its investigation into cryptocurrency market manipulation, demonstrating an innovative approach to combating financial crime in the digital realm.
According to the US government, the NexFundAI cryptocurrency was developed by the FBI with the help of cooperating witnesses to detect fraud in the cryptocurrency market. Using these tokens, agents were able to track illegal manipulation schemes such as pump-and-dump. As a result of the investigation, the Securities and Exchange Commission (SEC) charged three market makers and nine individuals with attempts to artificially inflate the prices of cryptoassets. The Department of Justice has indicted 18 individuals and entities for massive fraud and manipulation of crypto markets. Among the defendants are ZMQuant, CLS Global, and MyTrade, who allegedly acted on behalf of NexFundAI without knowing that the token was created by the FBI. In general, fraudulent actions led to millions of losses for investors.
Pump-and-dump schemes have been known from traditional financial markets, but with the advent of cryptocurrencies, they have become especially popular due to the anonymity and decentralized nature of blockchain technology. The FBI used tokens to expose these schemes and monitor trader behavior. The operation made it possible to obtain vital information and bring the perpetrators to justice.
The FBI was able to obtain evidence that one of the “market makers” Liu Zhou of MyTrade MM admitted that they “controlled the pump and dump process” allowing “easy insider trading.”