Cryptocurrency Firm Agrees to Plead Guilty in FBI Sting Operation
A cryptocurrency financial services firm has agreed to plead guilty to U.S. charges that it offered to help manipulate the market for a digital token created at the FBI’s behest to help uncover fraud in the crypto sector. CLS Global, registered in the United Arab Emirates, was one of three companies and 15 individuals charged last year by federal prosecutors in Boston following a novel crypto-focused undercover investigation dubbed ‘Operation Token Mirrors.’
This operation marked the first time the FBI directed the creation of its own digital token, as well as a fake cryptocurrency company to help bait and catch fraudsters in the market. Prosecutors said CLS was one of three so-called market makers that offered illicit trading services to cryptocurrency companies and, during the sting operation, agreed to help manipulate the market for FBI-backed NexFundAI’s token, which operated on the Ethereum blockchain.
In court papers, the company admitted that it agreed to provide services for the NexFundAI token that included sham transactions called wash trading, designed to artificially inflate an asset’s trading volume or price. CLS will plead guilty to two counts related to its fraudulent manipulation of cryptocurrency trading volume and pay $428,059. The company will also be barred from participating in cryptocurrency transactions on trading platforms available to U.S. investors or providing services to U.S. cryptocurrency clients.
Additionally, CLS Global committed to making annual certifications about its business practices and agreed to settle related civil charges by the U.S. Securities and Exchange Commission. The company’s lawyer did not respond to a request for comment, while CLS maintained that it had always sought to take its compliance obligations seriously and ensure its operations remained separate from U.S. markets and regulatory systems.
