Cryptocurrency declared AI token wash trading after stabbing DOJ undercover

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Federal agents have appeared as crypto startups exposing CLS Global’s role in AI token wash trades, revealing deceptive algorithms used to fake market demand.

Secret Doj Sting reveals AI tokens and crypto wash trades as bait

The U.S. Department of Justice (DOJ) announced on April 2 that CLS Global FZC LLC, a cryptocurrency financial services company based in the United Arab Emirates (UAE), has been ruled in federal court for its involvement in a deceptive digital asset transaction tactic. The company pleaded guilty to a conspiracy to engage in market manipulation and wire fraud following a stabbing operation organized by federal agents. The DOJ explained it as part of the judgment.

CLS Global has been ordered to pay the government a total of $428,059, representing both the fine and the seized cryptocurrency.

“The court also declared CLS Global a three-year probation period, during which CLS Global is prohibited from participating in the US cryptocurrency market,” the Department of Justice said.

The conviction stems from a secret investigation using a fictitious cryptocurrency project to expose illegal trading activities. Under the guise of a real startup, federal agents developed a website, issued tokens on UnisWap Exchange, and then approached CLS Global for promotional trading services. The company used bathroom transactions to simulate demand.

According to DOJ:

CLS Global has agreed to provide market production services to Nexfundai tokens, including “wash trading” to attract investors to fraud and buy tokens.

During a recorded video call in mid-2024, CLS global representatives outlined how the company’s algorithms perform self-dealing transactions on multiple wallets to give the impression of legitimate market activity. Employees added that the strategy was difficult to track and was deployed for a large number of clients.

In addition to the criminal case, the Securities and Exchange Commission (SEC) filed another civil suit against the securities violation. Under the terms of both resolutions, CLS Global must comply with strict bans to serve U.S. clients and operate in the domestic digital asset market, and must prove compliance annually.