365Crypto
FBI Profits From Ethereum Token Created to Catch Scammers
The FBI created an Ethereum-based token to expose crypto fraudsters, making around $14,500 in the process, according to blockchain data. The token, known as NexF, was part of a sting operation aimed at catching those involved in market manipulation.
Operation Overview
In a recent case, the Department of Justice (DOJ) charged 14 people and four crypto firms, including Gotbit, ZM Quant, CLS Global, and MyTrade, with artificially inflating the value of cryptocurrencies. Among the 60 manipulated tokens identified, one was created specifically by the FBI to aid their investigation. This fake token was used to trick fraudsters into revealing their illegal activities.
How the Token Worked
NexF was launched in late May, and its trading was disabled just three weeks ago. The FBI initially added 5 ETH ($12,000) to a liquidity pool on the decentralized exchange Uniswap, along with 50 billion NexF tokens. After removing 43 billion NexF from the pool months later, the FBI’s wallet gained 11 ETH back, valued at $26,500, giving them a $14,500 profit.
Disabling Trades and Further Actions
Two weeks after NexF trading was disabled, the FBI moved $30,000 worth of Ethereum to a new wallet, where the funds remain under the agency’s control. This in decentralised world is called rug-pulling.
Market Manipulation Charges
The DOJ charged three market makers with misconduct related to manipulating NexF through wash trading, which involves buying and selling the same asset to inflate its price. According to the DOJ, CLS Global traders engaged in this practice until early September when the FBI disabled trading for NexF.
