The U.S. Department of Justice (DOJ) has unsealed a major criminal case against eighteen individuals and companies accused of manipulating cryptocurrency markets. The FBI, using an unprecedented approach, created a fake cryptocurrency called “NexFundAI” to ensnare the accused manipulators.

Market Manipulation Rife in Crypto

The crypto industry has long struggled with market manipulation, including tactics like wash trading—where fake buy and sell orders create an illusion of demand. Independent analysts estimate that over 50% of crypto trades are inflated, especially on offshore exchanges. This case represents the first major criminal prosecution by the DOJ against financial services firms for such market-rigging practices.

FBI’s Clever Sting Operation

To catch the manipulators, the FBI created NexFundAI, a fake token on the Ethereum blockchain. Posing as a company, agents met with the market makers behind the scheme, including one defendant who claimed to use trading bots to fake volumes on centralized exchanges. The meeting revealed a demand for an upfront payment of $2,000 in exchange for continued services. The FBI’s sting was key to identifying the culprits.

The investigation exposed the role of Saitama, a Massachusetts-incorporated crypto firm, in the fraudulent scheme. Saitama executives allegedly worked with Gotbit, a market maker, to artificially inflate the value of their token, creating a market cap of $7.5 billion. Executives reportedly sold their tokens secretly, pocketing tens of millions.

A Global Investigation

Some of the accused operated internationally, with connections in Russia and Portugal. So far, five defendants have pleaded guilty or agreed to cooperate with authorities. In addition to the DOJ’s indictment, the Securities and Exchange Commission (SEC) has filed civil complaints, further alleging securities law violations.

This case signals a critical step toward regulating market manipulation in the fast-evolving world of crypto trading.