On Wednesday, a U.S. court ordered the criminal prosecution of eighteen individuals and companies for allegedly using fraudulent methods to inflate cryptocurrency prices.
While this is the first case in the U.S. where there has been an indictment for artificially inflating crypto prices, what made it even more unique was the method used by the Federal Bureau of Investigation (FBI).
In their effort to catch the fraudsters, the FBI created its own cryptocurrency while concealing their identity and purpose.
Inflating cryptocurrency prices on exchanges through “wash trades” is not new. However, these practices lead to pump-and-dump schemes, leaving real investors with losses. According to a Forbes report, nearly 50% of all Bitcoin trades are fake.
Next Fund AI: FBI’s Crypto Project to Nab the Perpetrators
The FBI had reports of organized groups and companies involved in pumping cryptocurrency prices and selling them at their peak. However, there was no way to establish connections and identify those working behind the scenes, defrauding investors of millions.
To catch these “market manipulators,” investigators planned to play Satoshi Nakamoto (the anonymous Bitcoin founder) and launched their own cryptocurrency. They named it Next Fund AI.
As the newly launched crypto started trading on exchanges, an undercover agent, posing as a member of the Next Fund AI team, began forming connections with people in the market who could help pump the trade volume and artificially raise prices.
In their attempt to inflate the price of Next Fund AI, FBI undercover agents met several of the accused, who promised to artificially boost the token’s price in exchange for a promised sum of money.
The Accused Worked For Saitama
The majority of the accused, according to the FBI’s report, worked for Saitama, a U.S.-based company registered in Massachusetts. True to their word, they pumped the valuation of Next Fund AI, which reached a peak of $7.5 billion. Interestingly, the Next Fund AI is still actively trading.
Allegedly, Saitama was working with Gotbit, a well-known market maker. The charges claim the accused made millions by inflating coin prices.
The FBI has recently increased its efforts to protect crypto investors from fraud. In a recent report, the agency also warned U.S.-based crypto firms to stay vigilant, as North Korean state-sponsored actors could launch cyberattacks on U.S. blockchain companies.
