United Arab Emirates-based crypto services firm CLS Global has pleaded guilty to charges of market manipulation and wire fraud after assisting in the fraudulent trading of a cryptocurrency token created by the FBI to expose fraudsters.
The token, named NexFundAI (NEXF), was part of an undercover operation designed by the FBI to attract individuals engaged in fraudulent cryptocurrency schemes, including pump-and-dump activities.
Details of the Plea Deal
On January 21, the Massachusetts U.S. Attorney’s Office announced that CLS Global agreed to plead guilty to two counts of market manipulation and wire fraud. As part of the plea agreement, the company will:
- Pay a $428,059 fine.
- Forfeit funds held in accounts on Binance and KuCoin.
- Be prohibited from engaging in crypto transactions on trading platforms accessible to U.S.-based investors.
- Make annual certifications to the SEC confirming compliance with this prohibition.
The company was also placed on three years of probation and will no longer offer its services to anyone in the U.S.
FBI’s Undercover Operation
The FBI created NexFundAI (NEXF) as part of a sting operation to identify and expose fraudulent behavior in the cryptocurrency market. By posing as scammers, FBI agents sought assistance from firms like CLS Global to artificially inflate the token’s trading volume, creating the illusion of popularity and legitimacy to attract unsuspecting investors.
CLS admitted to engaging in wash trading—the practice of executing fake buy-and-sell transactions to manipulate market activity—for NexFundAI. The goal was to lure investors into purchasing the token based on fraudulent market activity.
Additional Legal Actions
The SEC also filed civil charges against CLS Global in October 2024, alleging violations of securities laws. A separate resolution with the SEC has been reached, ensuring that any funds seized from CLS will be credited across both criminal and civil cases.
The Justice Department announced in October that 18 individuals and one other company, MyTrade MM, were implicated in the broader operation. This marks the first time the FBI has publicly disclosed the creation of its own cryptocurrency token and fake crypto company to target fraudsters.
Fallout for CLS Global
Under the plea deal, CLS Global can no longer provide services to U.S. investors or participate in U.S.-accessible crypto platforms. The case underscores growing efforts by U.S. regulators and law enforcement to combat fraud in the cryptocurrency space through innovative approaches like undercover operations.
The FBI’s operation highlights how law enforcement agencies are using novel strategies to identify and prosecute bad actors in the crypto space. This case serves as a warning to firms engaging in illegal activities, with regulators and agencies like the SEC and FBI increasingly leveraging technology to police the market.
