FBI nabs crypto wash trading scheme on Uniswap

FBI investigators have charged a UAE-based crypto firm with generating fake trading volume using wash trading algorithms on Uniswap’s decentralized exchange.

The U.S. Attorney’s Office for the District of Massachusetts announced a settlement with CLS Global after undercover FBI agents uncovered the firm’s involvement in market manipulation and wire fraud.

CLS Global, described as a crypto market maker, has agreed to pay $428,000 in penalties and cease all operations within the U.S. crypto ecosystem. Additionally, the company will be required to submit yearly compliance reports under the terms outlined by the Boston prosecutor’s office.

FBI sting operation

Responding to allegations of wash trading on Ethereum DEX Uniswap, the FBI launched a clandestine operation, codenamed “Operation Token Mirrors,” to investigate offenders. As part of the sting, the federal agency created NexfundAI, a fake crypto project, to attract potential manipulators.

CLS Global fell for the trap, marketing its “volume generation” algorithms to undercover federal agents during multiple video meetings. In one of these sessions, a CLS Global employee admitted to the fraudulent activity, stating that the system was intentionally designed to be difficult to detect.

Between August 23 and September 18 last year, CLS Global reportedly created $595,000 in fake trading volume on Uniswap, according to prosecutors.

“I know that it’s wash trading,” the employee confessed, acknowledging the deliberate use of fake volume generators. CLS Global, which employed around 50 offshore staff, claimed partnerships with tier-1 centralized exchanges such as Binance, Bybit, and KuCoin.

Federal investigators have ramped up efforts to combat crypto-related schemes and scams. Last November, the FBI probed a $5 million crypto romance fraud case shortly after recovering $8 million in stolen funds from a Kansas bank debacle.