A United Arab Emirates (UAE) crypto services firm will plead guilty to charges related to a wash trading scheme to lure investors into buying a token created by US law enforcement authorities.
In a statement, the U.S. Attorney’s Office for the District of Massachusetts says crypto market maker CLS Global is facing charges following an undercover law enforcement operation targeting wash trading activities in the crypto market.
Wash trading is a fraudulent practice of artificially inflating the trading value of a cryptocurrency.
Those involved in the scheme simultaneously sell the asset and then buy it back, or vice versa, to generate fake trading volume and attract investors.
The Federal Bureau of Investigation (FBI) created the cryptocurrency company NexFundAI and an Ethereum-based token as part of the investigation, which found that CLS Global, along with two other market makers, wash-traded tokens for cryptocurrency companies in exchange for payment.
In video conferences, a CLS Global employee said their company could help with volume generation so the NexFundAI token would meet crypto exchange listing requirements and attract investors. CLS Global’s employed traders subsequently bought and sold the token on Uniswap crypto exchange using their company’s wallets.
CLS Global admitted that it agreed to provide market-making services for the NexFundAI token, which include wash trading to fraudulently attract token purchasers. It will also plead guilty to one count of conspiracy to commit market manipulation and wire fraud and one count of wire fraud to resolve the criminal charges.
If the plea is approved, the firm will also pay $428,059 and will be prohibited from participating in US crypto markets.
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