Crypto Security Sleuth and blockchain expert ZachxBT say CLS Global, a company that recently pleaded guilty to fraud, has approached him for promotion. According to a notice from the US Department of Justice (DOJ), the cryptocurrency market production company was charged by the Federal University Ju Trial in Boston on January 21.
Zachxbt responded to the platform’s February 14th “Happy Valentine’s Day” post, sharing a screenshot of the CLS Global message today.
“Just pleading guilty to SEC fraud late last year and seeking paid promotions,” the security expert asked.
Screenshot of message CLS global sent to Zachxbt in X. source: @zachxbt (x/twitter)
The charges mentioned by OnChainThruth came from a filing by the U.S. Securities and Exchange Commission (SEC) on October 9, 2024, accusing the company of engaging in laundering trading practices. The company has allowed its participation in a scheme that includes generating artificial trading volumes to mislead investors.
The UAE-based financial company has agreed to pay a $428,059 fine and forfeiture assets in its legal agreement, but is permanently prohibited from operating within the US crypto market.
Zachxbt recalls an operational investigation of the undercover market
A U.S. Department of Justice memo revealed how authorities launched an undercover investigation to expose CLS Global’s fraudulent trading tactics. Investigators have created Nexfundai, a fake cryptocurrency project with a website and Ethereum-based tokens listed on Uniswap.
The operation revealed that CLS Global has agreed to provide market production services to Nexfundai, including laundry transactions. This is an illegal practice of inflating trading volumes to attract unsuspecting investors.
CLS Global reportedly implemented a “market creation proposal” that includes a section called “volume support.” This section features a depiction of the CLS global “dashboard.” This displayed metrics such as “Total”, “CLS Volume”, and “External Volume”.
Traders employed by CLS Global used their trading wallet to buy and sell NexFundai tokens on the UNISWAP exchange. They also provided reports detailing the trading activities generated by the “volume generation algorithm.”
During video conferences from July to August 2024, CLS global employees will explain how the company uses algorithms to self-deal from multiple wallets, and real investors will be proactive in tokens. It made it seem like they are trading.
“It’s extremely difficult to track,” the employee boasted. “We do it for a lot of clients.”
Chain Analysis: Washing Trading is Ramping in the US
In a January 29th Chain Dissolution Research updated last Thursday, the data analytics platform has been reconciling four market makers, ZM, to coordinate trading activities that seek to fraud millions of funds from crypto investors. We have detailed SEC claims against Quant, Gorbit, CLS Global and MyTrade.
The Internal Revenue Service (IRS) later revealed that the laundering transaction scheme involves at least 18 individuals and entities with operational links to the UK and Portugal. These market makers are said to use automated trading bots to create a liquidity illusion and deceive investors by believing that certain tokens are in high demand.
Although specific methods for CLS Global have been exposed through the Nexfundai Sting Operation, the broader practices of artificial volume generation have not yet been fully revealed.
“Most academic research on Crypto’s cleaning trading currently focuses on centralized exchanges (CEXS). Unlike trading on CEXS, doing so on on a decentralized exchange (DEXS) will incur gas charges. And the washing trade becomes more expensive. Nevertheless, such activities still exist,” the report explained.
Chain Orisis quoted volume.li. This is a service that provides wash trading bots to customers who are trying to inflate DEXS’ token trading activities. Although not linked to the SEC case last October, Volume’s business model sheds light on how similar schemes work.
The service offers a variety of pricing tiers, allowing clients to purchase trading volumes ranging from $50 to $100,000 within 24 hours. A bot that generates $100,000 on a daily volume costs 0.212 ETH and runs 100 quick purchase and sales transactions to simulate real transactions.
“Even if our starting point is off-chain, when we combine open source research on platforms of interest with our own heuristics, as Volume.li illustrates, as we can see from the example, we can see that we can combine our own heuristics with our potential on-chain market operations. It gives you strong insights.”
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