The DOJ has announced that CLS Global FZC LLC will plead guilty to market manipulation and wire fraud. If the plea deal is approved, CLS Global will pay a $428,059 penalty consisting of seized cryptocurrency and a fine.
Fake Trading Volumes: UAE Market Maker Caught in Undercover FBI Sting Operation
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CLS Global Busted in FBI Sting Operation
The U.S. Department of Justice (DOJ) announced on Jan. 21 that CLS Global FZC LLC has agreed to plead guilty to one count of conspiracy to commit market manipulation and wire fraud. If the plea deal is approved by the court, CLS Global will pay a penalty of $428,059 which will be comprised of seized cryptocurrency and an undisclosed fine.
The DOJ statement said the plea agreement also bars CLS Global from participating in U.S. cryptocurrency markets. The charges against CLS Global stem from allegations that it manipulated its cryptocurrency trading volumes to attract investors. The UAE-registered market maker is also accused of promoting the practice to U.S. investors.
According to the DOJ, CLS Global was ensnared by undercover Federal Bureau of Investigation (FBI) agents using a fake cryptocurrency company called Nexfundai. The undercover operation involved an Ethereum-based token that traded on Uniswap. During a videoconference, an unnamed employee is said to have detailed how CLS Global uses an “algorithm” to generate trading volumes needed to meet exchange listing requirements.
The employee, who reportedly bragged about how the wash trading was hard to track, allegedly knew the practice was illegal.
“It’s very hard to track. . . . We’ve been doing that for many clients. I know that it’s wash trading and I know people might not be happy about it,” the employee said.
As part of its settlement with the DOJ, CLS Global is said to have agreed not to use crypto trading platforms available to U.S. investors. It also agreed to make annual certifications confirming that its business practices adhere to the conditions set in the plea agreement.
Meanwhile, the statement revealed that the UAE-registered company is also the subject of a civil enforcement action by the U.S. Securities and Exchange Commission (SEC) over its alleged violations of securities law. Consequently, the funds seized from or paid by CLS Global will be credited in the SEC resolution, and vice versa, the DOJ statement added.
