FBI nabs crypto wash trading scheme on Uniswap

FBI investigators have accused a UAE-based crypto company of generating fake trading volumes using wash trading algorithms on the decentralized exchange Uniswap.

United States Attorney’s Office for the District of Massachusetts announcement a settlement with CLS Global after undercover FBI agents discovered the company’s involvement in market manipulation and wire fraud.

CLS Global, described as a crypto market maker, has agreed to pay $428,000 in penalties and cease all operations within the US crypto ecosystem. Additionally, the company will be required to submit annual compliance reports under conditions set by the Boston District Attorney’s Office.

FBI sting operation

In response to allegations of bogus trading on Ethereum DEX Uniswap, the FBI launched a clandestine operation, dubbed “Operation Token Mirrors,” to investigate violators. As part of this operation, the federal agency created NexfundAI, a fake crypto project, to attract potential manipulators.

CLS Global fell into the trap by marketing its “volume generation” algorithms to infiltrate federal agents in multiple video meetings. During one of these sessions, a CLS Global employee admitted to the fraudulent activity, stating that the system was intentionally designed to be difficult to detect.

Between August 23 and September 18 of last year, CLS Global allegedly created $595,000 in fake trading volume on Uniswap, according to prosecutors.

“I know it’s wash trading,” the employee confessed, acknowledging the deliberate use of fake volume generators. CLS Global, which employed around 50 people overseas, claimed partnerships with centralized Tier 1 exchanges such as Binance, Bybit and KuCoin.

Federal investigators have stepped up efforts to combat crypto-related schemes and scams. Last November, the FBI probe a $5 million crypto romance fraud case soon after to recover $8 million in funds stolen in Kansas banking debacle.