How the FBI Created a Cryptocurrency to Trap Scammers

In a bold move against crypto fraud, the Federal Bureau of Investigation (FBI) has used scammers’ own tactics against them by creating a fake cryptocurrency as bait. This marks the first time the FBI has disclosed such a strategy, aimed at catching fraudsters in the act.

The FBI reports that this sting operation has led to market-manipulation and fraud charges against several crypto firms, including Gotbit, CLS Global, MyTrade, and ZM Quant, along with 18 individuals involved. Authorities have seized over $25 million in crypto assets, and shut down multiple trading bots that allegedly manipulated the value of approximately 60 cryptocurrencies.

“What the FBI uncovered in this case is essentially a new twist to old-school financial crime,” stated Jodi Cohen, the special agent in charge of the FBI’s Boston division.

As part of “Operation Token Mirrors,” the FBI launched an Ethereum-based cryptocurrency called NexFundAI Token. The goal was to target those involved in fraudulent token development, promotion, and market manipulation. The defendants are accused of luring investors with deceptive claims and engaging in wash trading—a practice that fabricates trading activity to create the illusion of high demand. This manipulation artificially boosted token prices, enabling scammers to profit at inflated rates. Unbeknownst to them, the token was part of the FBI’s sting operation.

“This investigation, the first of its kind, identified numerous fraudsters in the cryptocurrency industry. Wash trading has long been outlawed in the financial markets, and cryptocurrency is no exception,” said Acting U.S. Attorney Joshua Levy. This news follows the FBI’s creation of a dedicated cryptocurrency unit over two years ago.

Additionally, the Securities & Exchange Commission (SEC) has filed civil charges against Gotbit, CLS, ZM Quant, Saitama, and other firms for alleged securities law violations. Although NexFundAI trading has been disabled, its value had skyrocketed by over 1,558% at the height of the fraudulent activity.

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