FBI created a cryptocurrency so it could watch it being abused
- Reference: 1728624489
- News link: https://www.theregister.co.uk/2024/10/11/fbi_nexfundai_crypto_fraud_sting/
- Source link:
News of the Feds' currency, an Ethereum-based instrument named NexFundAI, appeared in a Wednesday [1]Department of Justice announcement that eighteen individuals have been charged "for widespread fraud and manipulation in the cryptocurrency markets."
The Feds allege some of the fraud involved "wash trades" – transactions conducted solely to increase the volume of trades in a security or other asset. Rising volumes of trades are often seen as an indicator that a stock is of increasing interest as it has good growth prospects – a signal that can see prices rise. But wash trades are often conducted by related entities, or even the same entity, to create a false market signal – an arrangement also known as "pump and dump."
[2]
Or, as the US Securities and Exchange Commission put it, the alleged schemes are "intended to induce investor victims to purchase the crypto assets by creating the false appearance of an active trading market for them."
[3]
[4]
Whatever you call this behavior, those behind it hope it will see an asset's price rise beyond what they paid for it. They then sell their own holdings for a profit.
One of the orgs in this case, called Saitama, created its own tokens. Company leadership "allegedly made a variety of false public statements, including that Saitama's business plan had been reviewed by regulators, that its leadership was not selling the Saitama tokens they owned, and that the Saitama token was coded in a way that prevented market manipulation."
[5]
But charging documents alleged that "in reality Saitama's leadership was actively manipulating the market for the Saitama token and secretly selling their Saitama tokens for tens of millions in profits."
That concept – a paper corporation that creates and promotes its own cryptocurrency – was adopted by the FBI, which created a company and coin named NexFundAI.
The DoJ alleges the accused conspired to wash trade on behalf of NexFundAI – but of course the Feds were in a privileged position to watch everything.
[6]
"The FBI took the unprecedented step of creating its very own cryptocurrency token and company to identify, disrupt, and bring these alleged fraudsters to justice," said Jodi Cohen, special agent in charge of FBI's Boston Division.
"What the FBI uncovered in this case is essentially a new twist to old-school financial crime," he added.
[7]FBI claims corrupt LA cops helped crypto CEO's cash grab
[8]SBF's right-hand woman praised for testimony – and jailed for two years
[9]US indicts two over socially engineered $230M+ crypto heist
[10]Crypto scams rake in $5.6B a year for cyberscum lowlifes, FBI says
And because they're old-school crimes, the US Securities and Exchange Commission has [11]announced charges against five "crypto asset promoters."
"Today's enforcement actions demonstrate, once more, that retail investors are being victimized by fraudulent activity by institutional actors in the markets for crypto assets," explained Sanjay Wadhwa, deputy director of the SEC's Division of Enforcement. "With purported promoters and self-anointed market makers teaming up to target the investing public with false promises of profits in the crypto markets, investors should be mindful that the deck may be stacked against them."
Arrests of those allegedly involved in these schemes were made in the UK, Portugal, and Texas this week. Four defendants have already plead guilty, and another intends to. ®
Get our [12]Tech Resources
[1] https://www.justice.gov/usao-ma/pr/eighteen-individuals-and-entities-charged-international-operation-targeting-widespread
[2] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_specialfeatures/cybersecuritymonth&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2Zwj3UgrroCZoV3csRxeM7AAAAIo&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_specialfeatures/cybersecuritymonth&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Zwj3UgrroCZoV3csRxeM7AAAAIo&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_specialfeatures/cybersecuritymonth&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Zwj3UgrroCZoV3csRxeM7AAAAIo&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_specialfeatures/cybersecuritymonth&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44Zwj3UgrroCZoV3csRxeM7AAAAIo&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[6] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_specialfeatures/cybersecuritymonth&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33Zwj3UgrroCZoV3csRxeM7AAAAIo&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[7] https://www.theregister.com/2024/10/02/fbi_zort_arrest/
[8] https://www.theregister.com/2024/09/25/caroline_ellison_ftx_prison/
[9] https://www.theregister.com/2024/09/20/us_indicts_two_over_socially/
[10] https://www.theregister.com/2024/09/10/crypto_scams_rake_in_56/
[11] https://www.sec.gov/newsroom/press-releases/2024-166
[12] https://whitepapers.theregister.com/
"coded in a way that prevented market manipulation"
Oh really ? And how did you do that ?
Because, apart from implementing rules that prevent customers from buying and/or selling x amount in t time, which somebody with average intelligence could circumvent using more than one account, I don't see that you're intelligent enough to prevent market manipulation.
But those were just words anyway. PR fluff to impress the gullible.
Which is the basic rule for anything crypto these days.
Re: "coded in a way that prevented market manipulation"
The amount of real money people hand over in exchange for the fake money isn't something the blockchain can control. The blockchain can control what happens when the "owner" of the coins decides to transfer it, but can't control what inducements (eg real money) would persuade the owner to initiate the transfer.
Have I missed something here? When did Crypto become regulated?
Maybe I've been half asleep and have missed the Crypto hype of being regulated.....
Ah well, win some you lose some, at least for the Crypto investors.
In 1933, following the Wall Street crash. It didn't specifically mention crypto, obviously, it hadn't been invented yet. But the problems they faced in 1929 were caused by the exact same frauds. The fact that it was done using morse code over telegraph lines rather than the much more sophisticated internet we have today doesn't really make any difference.
It is more likely that you were not born yet rather than asleep.
Upvote for the comedic use of your icon and the content of the post.
Very good.
Have a pint! ===>
Well, the FBI isn't a financial regulator so there's your first clue.
Cryptocurrency, like anything else, attracts the attention of law enforcement when it's used for fraudulent purposes.
Thank you!
You have confirmed I have indeed been asleep during the Crypto thing quickening!
Pint for you too @Necrohamster ===>
It's regulated in various places to different degrees. In the US it depends on the State you're in. New York has crypto licenses now.
If you're in the UK, then generally the FCA regulation generally applies, no need for new regulations...I think similar applies in Europe.
It's only dumbass backwaters like the US that can't figure itself out because of the insane number of regulatory bodies they have...they have to spend years working out what something is, so they can assign it to the appropriate department to be regulated...but its even more complicated than that, because the departmental budgets are set based on workload so even if a department has nothing to do with it, they want it to increase their budgets which draws the process out even longer...fucking dumb.
It's only dumbass backwaters like the US that can't figure itself out because of the insane number of regulatory bodies they have...
You'll find similar numbers of regulatory bodies in any large developed economy or economic bloc. I know this because I work in the regulatory system.
they have to spend years working out what something is, so they can assign it to the appropriate department to be regulated..
That's how most models of democracy work, because the regulators are part of the administrative branch of government (that deliver the policies governments enact), and all the decisions need to be taken by the executive branch of government (politicians), and the policy mostly needs to be enacted by legislation. Those last two aspects require involving the legislature, and that's another unbelievably slow process.
Change in government is slow. If you want a faster and more responsive government then you need to remove secretaries of state and their juniors from the legislature, have two or three times as many of them, and have them working full time on policy without the oversight or challenge of the legislature. Even then, stuff takes time - you want to change the law, that means impact assessments, business and public consultations, drafting a consultation, then reviewing each and every response, then drafting and review of new or changed policy, drafting, review, passing of new legislation. Because everything government does has to be done with the full authority of government, things do take many times longer than an equivalent decision in the private sector. And if it involves new regulatory responsibilities, work is needed to decide who is the regulator, how the regulations will be enforced, etc etc.
It's very disappointing how poorly informed most people are about how democracy actually works.
“false promises of profits in the crypto markets”
I’m more amazed there are still sufficient marks out there to power the crypto scam.
It's nice that scammers are being caught, but the trade volume thing is weaker than I thought this would be. The main message should be that using trade volumes is a bad signal, and you shouldn't use it, because it's so easy to fake. Not that you got scammed.
Hmmm? Well, it does, does it not?
"Today's enforcement actions demonstrate, once more, that retail investors are being victimized by fraudulent activity by institutional actors in the markets for crypto assets," explained Sanjay Wadhwa, deputy director of the SEC's Division of Enforcement. "With purported promoters and self-anointed market makers teaming up to target the investing public with false promises of profits in the crypto markets, investors should be mindful that the deck may be stacked against them.”
Does that statement from Sanjay Wadhwa, deputy director of the SEC's Division of Enforcement, identify and charge the FBI of promoting fraudulent activity?