CLS Global, a crypto financial services firm convicted in a market manipulation scheme involving NextFundAI (NEXF), has pleaded guilty to charges filed by authorities.
The UAE-based firm agreed to plead guilty to two counts of fraudulent manipulation of trading volumes and wire fraud in a plea deal yesterday.
CLS Global involvement in alleged crypto wash trading scheme
CLS Global participated in wash trading, which is the practice of buying and selling assets at the same time to generate false market activity. This method of trading is considered illegal and is seen as a form of market manipulation in many countries.
As part of the plea deal CLS Global agreed to yesterday, the firm will have to pay a fine of $428,059, as well as forfeit all of the funds it holds in different accounts on prominent crypto exchanges Binance and KuCoin.
Additionally, CLS Global agreed to stop providing services to anyone in the United States and was placed on probation for 3 years. The firm will also have to make annual certification to the US Securities and Exchange Commission (SEC) to show that it is adhering to the prohibition.
The SEC also filed civil charges against CLS Global in October last year for alleged securities laws violations. The regulator has entered into its own resolution with the firm.
“Moneys seized from or paid by CLS Global will be credited in the SEC resolution, and vice versa,” the district attorney’s office said.
FBI conducted sting operation to address crypto fraud
The NEXF token was created as part of a sting operation by the US Federal Bureau of Intelligence (FBI) to track down illicit actors in the crypto space who participate in pump-and-dump operations.
NEXF was positioned as an AI crypto, and was used by authorities to monitor transactions and detect fraudulent activities. This is the first time the FBI has developed a fake token to unmask market manipulators.
Following the token’s launch, the FBI reached out to individuals and businesses in the crypto space that claimed to offer vital services for new crypto projects, such as market making. Given the decentralized nature of the Web3 space, it is easier for unregulated firms to artificially raise a token’s price and trading volumes, leading to a false sense of popularity in the market and subsequently baiting unsuspecting traders and investors.
CLS Global is not the only bad actor caught through the NEXF token sting operation. The US Justice Department revealed in October last year that 18 individuals faced charges in the combined cases. Another leading financial company, MyTrade MM, also faces allegations for offering services to NextFundAI.
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