A cryptocurrency financial services company has agreed to plead guilty to U.S. charges that it helped manipulate the market for cryptocurrency tokens created by the FBI with the goal of detecting fraud.
CLS Global, headquartered in the United Arab Emirates, agreed to plead guilty to two counts of cryptocurrency trading volume manipulation and wire fraud under a plea deal on January 21.
The U.S. Attorney’s Office for the District of Massachusetts said CLS would pay a $428,059 fine and forfeit all funds held in multiple accounts at cryptocurrency exchanges Binance and KuCoin.
CLS was indicted last September after being ensnared by an FBI-created AI-related token called NexFundAI (NEXF), which was designed to lure people involved in fraudulent cryptocurrency activity, specifically pump-and-dump schemes.
source: United States Attorney’s Office, Massachusetts
The FBI posed as a fraudster and asked for help manipulating the token’s trading volume to trick investors into believing that NEXF was more popular than it used to be.
As part of the plea agreement, CLS admitted that it engaged in providing services for NexFundAI tokens, including wash trading, to fraudulently entice investors to purchase the tokens.
According to the plea agreement, CLS is prohibited from engaging in cryptocurrency trading on trading platforms available to investors in the United States and was placed on probation for three years.
Companies must annually certify to the Securities and Exchange Commission that they are in compliance with this prohibition.
As part of the plea deal, CLS Global can no longer provide services to anyone in the United States. source: court listener
The SEC filed a separate civil suit against CLS last October, alleging violations of securities laws, and reached a separate resolution with the company.
“Any monies seized or paid by CLS Global will be recognized by the SEC resolution and vice versa,” the district attorney’s office said.
relevant: Strange but true: 5 strange and strange cryptocurrency stories from 2024
The U.S. Department of Justice said in October that 18 people had been indicted in both cases, with an additional company, MyTrade MM, reportedly providing services to NexFundAI.
The operation was the first public example of the FBI creating its own digital tokens and fake cryptocurrency companies to bait and catch fraudsters in the market.
CLS Global did not immediately respond to a request for comment.
magazine: Legal Issues Surrounding FBI’s Creation of Fake Crypto Tokens