The FBI Used a "Pump and Dump" Scheme to Manipulate the Cryptocurrency Market and Arrest "Market Makers" with a "Disruptor" Strategy

The FBI Used a "Pump and Dump" Scheme to Manipulate the Cryptocurrency Market and Arrest "Market Makers" with a "Disruptor" StrategyThe Federal Bureau of Investigation (FBI) has been increasingly innovative in combating financial crimes in recent years. Its latest tactic is the use of a cryptocurrency "pump and dump" strategy, which successfully led to the arrest of a group of individuals suspected of manipulating cryptocurrency prices

The FBI Used a "Pump and Dump" Scheme to Manipulate the Cryptocurrency Market and Arrest "Market Makers" with a "Disruptor" Strategy

The Federal Bureau of Investigation (FBI) has been increasingly innovative in combating financial crimes in recent years. Its latest tactic is the use of a cryptocurrency "pump and dump" strategy, which successfully led to the arrest of a group of individuals suspected of manipulating cryptocurrency prices. This operation reveals the FBI's ingenuity in dealing with emerging financial crimes, while also exposing the "revival" of traditional financial market manipulation tactics in the realm of cryptocurrencies.

According to the French website Les Echos, the FBI refers to undercover agents who infiltrate target organizations as "disruptors." These "disruptors" are tasked with gathering intelligence and, when necessary, inducing members of the target organization to engage in actions that could lead to their arrest. The FBI applied this strategy to the cryptocurrency space by creating a cryptocurrency called NextFundAI and recommending it to individuals suspected of manipulating crypto prices.

The FBI's "disruptor" strategy is not a new tactic; it has existed since the time of the French monarchy. However, unlike in the past, today's "disruptors" have adapted to various epochal technological changes, particularly blockchain technology.

In this operation, the FBI launched NextFundAI on the Ethereum blockchain platform and recommended it to individuals suspected of manipulating cryptocurrency prices. When these "market makers" were induced to participate in manipulating the price of NextFundAI, the FBI followed the trail and ultimately seized over $25 million worth of cryptocurrencies and shut down money laundering bots that operated in about 60 cryptocurrencies.

The operation was triggered by the Securities and Exchange Commission's (SEC) investigation of a cryptocurrency company called Saitama. The company was alleged to have used market makers to inflate the price of its cryptocurrency. Prosecutors claimed that the total value of Saitama tokens was once inflated to $7.5 billion.

The FBI lured the "market makers" into the trap using NextFundAI, asking them to help manipulate its value. Ultimately, three companies fell for the scheme, allowing some trading bots to execute fake trades, manipulating hundreds of millions of dollars worth of crypto funds.

It is noteworthy that the FBI strictly regulated the trading of NextFundAI, preventing individual investors from actually buying in before the operation was complete. This means that while conducting the operation, the FBI also took steps to protect the interests of investors.

The FBI's operation reveals the new challenges faced by the cryptocurrency market, with traditional financial market manipulation tactics like "pump and dump" schemes making a "comeback" in the crypto space. In a statement, Joshua Levy, Acting U.S. Attorney for the District of Massachusetts, said, "Pump and dump schemes have been prohibited in the financial markets for a long time."

A "pump and dump" scheme involves a surge of both buy and sell orders targeting the same stock or cryptocurrency, artificially inflating its trading volume. First, the price is driven up: seeing the increased trading volume, other investors start buying, causing the price to rise. Then comes the sell-off: once the price has risen sufficiently, the manipulators sell all their holdings, causing the price to plummet, leading to losses for other investors who joined the game.

This incident exposes vulnerabilities in the regulation of the cryptocurrency market and warns investors to exercise caution and be wary of market manipulation tactics like "pump and dump" schemes. The FBI's operation provides a new approach to combating cryptocurrency market manipulation and demonstrates the regulatory authorities' determination and ability to address financial crimes.

Moreover, this incident also raises the following considerations:

• With the rapid development of the cryptocurrency market, how can the market be better regulated and financial risks be mitigated?

• How can technology be used to combat financial crimes in the cryptocurrency space?

• How can investor interests be protected and prevent them from becoming victims of market manipulation?

As the cryptocurrency market continues to evolve, various financial risks are emerging. Regulatory authorities and investors need to remain vigilant and work together to ensure the healthy development of the cryptocurrency market.