Key Takeaways
- The undercover operation revealed that FBI agents, posing as scammers, approached CLS Global for assistance in manipulating NexFundAI’s trading volume.
- As part of the plea deal, CLS Global will pay $428,059 in fines and forfeited crypto
Dubai-based crypto market-making firm, CLS Global has agreed to plead guilty to charges of market manipulation and wire fraud. The announcement was made by U.S. prosecutors from the District of Massachusetts following an undercover investigation by the Federal Bureau of Investigation (FBI) into illicit trading practices on decentralized platforms like Uniswap.
The charges against CLS Global relate to its involvement with NexFundAI, an Ethereum-based token created as part of the FBI’s probe. According to court filings, the company admitted to engaging in wash trading, a manipulative market practice where assets are bought and sold between associated accounts to artificially inflate trading volume and mislead investors. The goal was to falsely enhance the token’s appeal and attract potential buyers.
The undercover operation revealed that FBI agents, posing as scammers, approached CLS Global for assistance in manipulating NexFundAI’s trading volume. During recorded video conferences, a CLS employee reportedly explained the company’s methodology for generating fake trading activity. This included using algorithms to conduct self-trades across multiple wallets to make the activity appear organic and less traceable.
In one of the video calls, the CLS employee allegedly stated, “I know that it’s wash trading, and I know people might not be happy about it.” Prosecutors cited these admissions as evidence of the firm’s role in the fraudulent scheme.
Under the plea deal conditions, CLS Global will pay $428,059 in fines and forfeited crypto. Additionally, the firm has been placed on probation for three years and is prohibited from participating in any cryptocurrency transactions on platforms accessible to U.S. investors. To ensure compliance, CLS must make annual certifications to the U.S. Securities and Exchange Commission (SEC) confirming adherence to the ban.
The firm was first indicted in September 2024 on charges of conspiracy to commit market manipulation and wire fraud, as well as a separate count of wire fraud. These charges stem from the FBI’s creation of the NexFundAI token, which was listed on Uniswap to investigate fraudulent trading practices.
The investigation concluded that CLS traders used the company’s trading wallets to execute self-trades on NexFundAI, inflating the token’s market activity and price. This tactic misled investors and created a false sense of popularity around the token.
The SEC has also brought civil charges against CLS Global for violating securities laws. In response to the allegations, CLS CEO Filipp Veselov stated, “We recognize that there may be areas where we can improve our processes, and we are open to constructive dialogue with regulatory authorities.”
