In a groundbreaking operation known as Operation Token Mirrors, the FBI launched a fake cryptocurrency company, NexFundAI, to expose large-scale market manipulation within the digital asset space. Marketed as a cutting-edge AI and cryptocurrency initiative, NexFundAI drew the attention of several participants linked to fraudulent trading practices.
Using this phony cryptocurrency as bait, the FBI and the Department of Justice (DOJ) successfully identified 18 individuals and entities involved in wash trading and pump-and-dump schemes designed to artificially inflate token values, deceiving unsuspecting investors. This operation resulted in the seizure of over $25 million in digital assets and the disabling of multiple trading bots associated with these illicit activities. Several suspects now face charges, and arrests have been made across various countries.
Among those caught in the operation were notable market makers, including ZM Quant, CLS Global, and MyTrade. Employees from these firms were charged with conducting illegal wash trades—trading with themselves to create misleading market activity and inflate token prices. Additionally, Gotbit and its executives are facing charges for employing similar tactics, which further expanded the scope of the manipulation scheme.
Wash trading, often referred to as round-trip trading, is a deceptive practice where the same assets are repeatedly bought and sold to mislead investors about an asset’s liquidity and demand. In total, 18 individuals and entities have been implicated in this scheme, with some already pleading guilty, while others have been arrested in the U.S., U.K., and Portugal. The operation led to the seizure of more than $25 million in cryptocurrencies and the shutdown of multiple trading bots linked to the manipulation of approximately 60 different cryptocurrencies.
As part of the investigation, authorities revealed that the accused employed a classic pump-and-dump strategy: they artificially inflated token values to attract unsuspecting investors, then sold off their tokens at a profit before the value collapsed. This practice reflects a broader pattern of financial crime that continues to target crypto markets, exploiting investor trust and enthusiasm for digital assets.
“Today’s enforcement actions underscore the risks retail investors face from fraudulent activities in the crypto markets,” stated Sanjay Wadhwa, deputy director of the SEC’s Division of Enforcement. He cautioned that market makers and promoters often exploit public trust with promises of easy profits, urging investors to exercise caution.
