The sting operation, which featured a fake crypto token, helped the bureau trap several fraudulent market makers.
The FBI’s Fake Token: NexFundAI
The agency’s ruse, which unfolded over several months, centered on a fake Ethereum-based token called NexFundAI.
FBI crypto token. Source: DexScreener
As the token gained traction, the FBI carefully built relationships with four major market makers, each with suspected ties to multiple pump-and-dump schemes.
Gotbit, CLS Global, MyTrade, and ZM Quant were the firms caught in the dragnet and accused of artificially inflating token prices through sham trades in exchange for kickbacks.
The FBI caught 18 individuals.
In an unsealed memo on Wednesday, Oct. 9, the FBI announced that four individuals had pleaded guilty. Another defendant has agreed to plead guilty, while authorities arrested three additional suspects this week in Texas, the United Kingdom, and Portugal.
FBI Reaches Out to NexFundAI Victims
Following the sting operation, the FBI has contacted victims of NexFundAI and other tokens linked to it.
The agency has set up a dedicated form for individuals who lost funds while trading these tokens to come forward and seek assistance.
Those who fill out the form may be eligible for various services, restitution, and legal protections under federal and state law. The unusual appeal to victims is part of the FBI’s broader effort to root out fraud in the crypto industry.
Acting United States Attorney Joshua Levy said it was the first of its kind operation and identified numerous fraudsters in the crypto industry.
“These are cases where an innovative technology – cryptocurrency – met a century-old scheme – the pump and dump. The message today is if you make false statements to trick investors, that’s fraud. Period. Our Office will aggressively pursue fraud, including in the cryptocurrency industry,”
The FBI also disclosed that the Securities and Exchange Commission (SEC) has filed civil complaints against Gotbit, CLS, ZM Quant, Saitama, and Robo Inu, alleging violations of securities laws related to their conduct.
The FBI’s Rug Pull
The crypto community was abuzz after the FBI’s first crypto sting operation.
Some users joked that the agency had “rug-pulled” retail investors.
However, many in the crypto community praised the FBI’s approach, cautioning would-be manipulators that the agency was now technologically savvy enough to catch them in the act.
Users shared telling visualizations of the NexFundAI token’s transaction history on social media, highlighting how only fraudulent firms interacted with it.
On-chain analysis tool Bubblemaps showed how the FBI had cleverly seeded its wallets, deploying capital to multiple other wallets and making dozens of trades.
The operation marked a first for the agency, but its technique was decidedly old-school: using a classic “honey trap” to catch criminal behavior.
The stunt has left many in the crypto community wondering what other tricks the FBI might have to combat fraud in the space.
Prashant Jha is a seasoned crypto journalist based in Delhi, India, with a Bachelor’s Degree in Computer Science Engineering. Passionate about the evolving world of blockchain and cryptocurrencies, he has been a dedicated voice in the industry since 2018. Prashant’s expertise lies in regulatory reporting, where he unravels complex legal and financial developments with clarity and precision. Before joining CCN in 2024, he honed his craft at Cointelegraph, establishing himself as a trusted name in crypto journalism.
His coverage spans major industry events, including the high-profile collapses of FTX, Three Arrows Capital (3AC), and LUNA, offering readers insightful analyses of their regulatory and market implications. Prashant’s technical background enables him to bridge the gap between intricate blockchain technology and its real-world applications, making his work accessible to novices and experts.
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