Analysis
Global Operation and Legal Action
Market Manipulation as a Service, Fraud for a Fee, Merchants of Manipulation, and Rigging for Rent are all terms to describe a series of actions executed by financial services firms that were uncovered by the United States Department of Justice (DOJ) and spans the U.S., the United Kingdom, Hong Kong, Canada, United Arab Emirates, Vietnam and Portugal. This case highlights both the ingenuity of modern fraud and the innovative tactics of law enforcement and regulators in their response with the Federal Bureau of Investigation (FBI), going as far as creating their own cryptocurrency token, called NexFundAI, to help catch the perpetrators.
The schemes revolved around wash-trading of cryptocurrencies, something I covered in detail in an earlier issue of Regulatory Roundup. The research shows that wash trading is effective at drawing investors into an instrument. The other manipulative tactic used was the pump-and-dump scheme, which has evolved steadily in recent years. The charging documents talk extensively about the “false statements” and “wash trades,” which are a hallmark of the “pump” phase.
Operation Token Mirrors
The law enforcement action was code-named “Operation Token Mirrors” and, so far, has seized $25 million in cryptocurrency and deactivated trading bots responsible for wash trading in 60 different cryptocurrencies. For this analysis, I’ll focus on two cases specifically targeting the Market Manipulation as a Service aspect. It is important to note that these are details from charging documents and, therefore, are allegations by the DOJ. The defendants are presumed to be innocent unless and until proven guilty beyond a reasonable doubt in the court of law.
In the first charge, the company alleged to have performed the market manipulation promotes its “volume support” tool, which, in an online video, claims it would allow clients to “designate a minimum trading volume and maximum trading volume, and then our bot will make natural, real-looking wash trades and deliver you a trading volume within that range every day.” The website goes into greater detail explaining that “the bot will trade randomly within this range with no loss besides exchange trading fees.” In video calls with NexFundAI, the firm even described providing a “dashboard,” which would allow users to manage those bots.
Merchants of Manipulation
In a series of calls with NexFundAI, the FBI’s Trojan…
Click Here to Read the Full Original Article at Cryptocurrencies Feed…
