FBI: Crypto Fraud Cases Increase by 45%, Reaching $5.6 Billion

Investigation Started with Saitama, But Uncovered a Network of Dodginess

The FBI has charged four cryptocurrency companies (Saitama, Robo Inu, VZZN and Lilian Finance) and four ‘market maker’ firms (Gotbit, ZM Quant, CLS Global and MyTradeMM) alleging they worked together to pump and dump a smorgasbord of shitcoins.

Sounds kinda standard for the crypto market doesn’t it?

The twist is that one of these shitcoins, NexFundAI, was actually created by the FBI for the express purpose of catching these dodgy companies as they attempted to fraudulently pump the token’s price.

The FBI’s investigation began after it received a tip off from the Securities and Exchange Commission (SEC) that the crypto company, Saitama, was engaging in market manipulation to increase the price of its token. The FBI’s investigation of Saitama led to the eventual launch of NexFundAI, which allowed the bureau to observe up close how these ‘market makers’ pumped the token at the expense of legitimate investors.

In all, 18 individuals and organisations have been charged with fraud, including four large crypto firms, the leaders of the ‘market making’ firms and several employees of the ‘market making’ firms. So far, four of the alleged fraudsters have pleaded guilty and several wash trading bots — responsible for tens of millions of dollars worth of fraudulent trades in over 60 different cryptocurrencies — have been shut down.

The FBI received information from the SEC suggesting that Saitama, which at one time had a market cap of over US$7 billion, was engaging in market manipulation to pump the price of its token.

During the course of its Saitama investigation, the FBI identified that Robo Inu, VZZN and Lillian Finance were all also committing fraud and other crimes as they attempted to pump their token prices. All of these companies, other than Lillian Finance, are closely linked to former Saitama employees. The leaders of the four companies are now facing numerous criminal charges.

The FBI says that these companies and their leaders “made false statements about their cryptocurrencies (“tokens”) and executed sham trades in those tokens (“wash trades”) to create the appearance of trading activity that would make the tokens look like good investments.”

Acting United States Attorney Joshua Levy said:

“This case demonstrates the FBI’s commitment to protecting investors from fraud in the emerging cryptocurrency market. Through a sophisticated investigation, the FBI was able to infiltrate a network of fraudsters and expose their مخطط to manipulate the cryptocurrency market.”

The FBI’s Shitcoin Catches ‘Market Makers’ in The Act

During its investigation into Saitama, the FBI began cooperating with several witnesses to launch its token, NexFundAI, to use as bait to get the dodgy ‘market makers’ interested.

Three of these ‘market makers’ — ZM Quant, CLS Global and MyTrade MM — either engaged in, or conspired to engage in, wash trading on behalf of NexFundAI. A fourth ‘market maker’, GotBit and its leadership team were also charged for their involvement in a similar but separate scheme.

Jodi Cohen, Special Agent in Charge of the Federal Bureau of Investigation, Boston Division, said the fraud took place in the emerging cryptocurrency market and took advantage of new opportunities presented by blockchain technology:

“The fraudsters used these opportunities to quickly generate illicit profits, while leaving behind a trail of deceived investors and endangered retirement accounts.”