Key Takeaways
- Federal agents used a fake crypto startup, NexFundAI, to expose fraudulent wash trading by CLS Global.
- CLS Global pleaded guilty to conspiracy to commit market manipulation and wire fraud.
- The company is fined $428,059 and banned from U.S. crypto markets for three years.
Federal Authorities Uncover Deceptive AI Trading Tactics
The U.S. Department of Justice (DOJ) announced on April 2, 2025, that CLS Global FZC LLC, a cryptocurrency financial services firm headquartered in the UAE, was sentenced in federal court for its role in deceptive digital asset trading tactics. Federal agents posed as a crypto startup to expose CLS Global’s role in AI token wash trades, revealing the use of deceptive algorithms to fake market demand.
After an undercover investigation, CLS Global pleaded guilty to conspiracy to commit market manipulation and wire fraud. The sting operation used the fictitious project NexFundAI as bait. Federal agents created a website and issued a token on the Uniswap exchange.
They then approached CLS Global for promotional trading services. The firm complied, engaging in wash trading and artificially inflating the token’s market activity. DOJ court documents state, “CLS Global agreed to provide market-making services for the NexFundAI token that included ‘wash trading’ to attract investors to purchase the token fraudulently.”
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During recorded video calls in mid-2024, a representative from CLS Global explained how its algorithm executed self-trades across multiple wallets to simulate legitimate market activity. The employee stated that the strategy was difficult to trace and had been used for several clients. The court ordered CLS Global to pay $428,059 in fines and forfeit the seized cryptocurrency.
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Strict Enforcement of U.S. Market Restrictions
The court also sentenced CLS Global to three years of probation. The company cannot operate in or provide services to U.S.-based cryptocurrency markets during this period. In addition to the criminal case, the U.S. Securities and Exchange Commission (SEC) filed a separate civil action for securities violations. Under the terms of both resolutions, CLS Global must certify compliance annually and adhere to strict prohibitions.
This verdict highlights the DOJ’s commitment to cracking down on fraudulent digital asset practices. The operation underscores the risks of fake market demand and the misuse of AI-driven trading strategies. The case also illustrates regulators’ challenges when prosecuting complex digital asset schemes. By banning CLS Global from U.S. markets, authorities aim to deter similar practices and protect investors from manipulation.
The successful sting operation and subsequent penalties clearly message the crypto industry about enforcing anti-fraud and market manipulation laws. Regulators are expected to continue tightening compliance requirements for cryptocurrency financial services.
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