The FBI has successfully conducted “Operation Token Mirrors,” an undercover operation using a fake cryptocurrency called “The NexFundAI Token” to identify and catch fraudsters within the crypto industry. The operation resulted in the arrest of 18 individuals tied to illegal activities, including market manipulation, wash trading, and pump-and-dump schemes. This marks one of the first instances of a law enforcement agency creating its own cryptocurrency to expose criminal networks operating within the digital asset space.
The operation targeted top executives and employees from four crypto firms and four financial service companies that acted as “market makers.” These firms allegedly inflated the value of their tokens by executing fraudulent trades to create a false impression of demand. Acting U.S. Attorney Joshua Levy and Special Agent Jodi Cohen from the FBI’s Boston Division were involved in coordinating the operation, alongside other federal agencies.
The investigation led to the arrests on Wednesday, October 9, 2024. The operation, which had been ongoing for months, concluded with the seizure of over $25 million in crypto assets and the shutdown of fraudulent trading bots that manipulated the prices of around 60 cryptocurrencies.
The operation was conducted primarily in the United States, but the scope of the investigation included international markets due to the cross-border nature of digital assets. NexFundAI was deployed on the Ethereum blockchain and interacted with various platforms like Binance, Tokenlon, and HTX.
The FBI’s objective was to dismantle sophisticated trading schemes that damage investor confidence and disrupt the integrity of crypto markets. By creating a fake token, the agency was able to bait bad actors into exposing themselves, allowing investigators to monitor and capture illegal activities in real-time.
The FBI launched NexFundAI as a bait token, labeling it as a security to attract fraudulent traders and market manipulators. The criminals were observed engaging in wash trading, a deceptive practice where sham trades are conducted to create an illusion of high trading volumes. The FBI’s undercover operation revealed that these companies had hired market makers to artificially pump up the value of their tokens and then lure unsuspecting investors. During the sting, the agency confiscated the fraudulent trading bots and linked multiple crypto wallets back to the defendants.
The operation not only uncovered illegal activities but also sent a strong message to bad actors that the FBI is willing to innovate to combat crypto crimes effectively.
