FBI Sting Operation Exposes Crypto Wash Trading Scheme

• FBI’s NexFundAI helped the agency nab market manipulators in crypto.
• Kaiko reported a symmetry in buying and selling volume of the token. 
• The scammers engaged in wash trading and investors remained unaware.

An FBI sting operation called Operation Token Mirrors used a fake crypto project, NexFundAI, to expose wash trading by three market makers: ZM Quant, CLS Global, and MyTrade. Blockchain research firm Kaiko analyzed on-chain data, confirming the FBI’s findings and revealing the extent of the manipulation.

The FBI created NexFundAI in May 2024 and had listed it on Uniswap, where the market makers used bots and hundreds of wallets to create the illusion of trading activity. Kaiko found that buying and selling volumes were symmetrical, indicating that the firms were simply offsetting trades to artificially inflate volume.

Kaiko said it analyzed the on-chain data for the NexFundAI cryptocurrency and found wash trading patterns that these firms and individuals created. The blockchain analysis entity said its findings “reinforce information uncovered by the FBI through its undercover ‘sting’ operation.”

The NexFundAI cryptocurrency was only available on Uniswap. Kaiko also examined the secondary market data. The firm calculated the aggregate volume for NexFundAI on this market and found symmetry between the buying and selling volumes, which suggests that manipulation was rampant.

Symmetry in Buy and Sell Volumes Points to Wash Trading

Kaiko said that the symmetry in buying and selling volumes showed that the market-making companies were “offsetting a total amount across all wallets engaged in wash trading on this market each day.”

Read also: FBI Takes Down Crypto Wash Trading Ring Seizes $25 Million

The FBI created the NexFundAI crypto and made it look like a legitimate project to attract market manipulators. The agency charged eighteen people on October 9, according to an announcement.

Acting United States Attorney Joshua Levy had a warning for scammers, saying that making false statements to trick investors is fraud and that the US Attorney’s office will “aggressively pursue fraud.”

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