tl;dr
A UAE-based crypto market maker, CLS Global, has confessed to orchestrating a wash trading scheme on Uniswap, generating millions in fake trading volume. The company will plead guilty to market manipulation and wire fraud charges, paying over $428,000 in penalties and forfeited assets. It will be ex...
UAE-based crypto market maker, CLS Global, has admitted to orchestrating an elaborate wash trading scheme that fooled U.S. investors by generating millions in fake trading volume through automated self-dealing on Uniswap.
The company will plead guilty to market manipulation and wire fraud charges, paying over $428,000 in penalties and forfeited assets. It will be excluded from U.S. crypto markets and must file annual compliance certifications.
Creative volume generation algorithms were utilized to create artificial market activity, with automated systems generating $595,000 in artificial volume for a fake crypto. CLS Global operated a technical infrastructure designed to manipulate crypto markets, involving multiple wallets and boasting about the scheme's success.
In October last year, the FBI initiated "Operation Token Mirrors" targeting fraudulent entities, leading to the exposure of CLS Global's wash trading scheme on Uniswap. This came as a result of the FBI launching a fake crypto called NexfundAI and coordinating with federal authorities to bring down CLS Global and two other "so-called market makers."
CLS Global, which employed over 50 people outside the U.S., marketed itself as a legitimate market maker serving over 500 clients since 2017 and claimed partnerships with major exchanges including Binance, Bybit, KuCoin, and others. However, behind the professional façade, the company operated a technical infrastructure specifically designed to manipulate crypto markets.
Sophisticated custom "volume generation" algorithms executed trades between multiple wallets to create the illusion of organic market activity. This resulted in $595,000 in artificial volume for the FBI’s token, accounting for 98% of its overall trading activity, before law enforcement "disabled" the token.
While major centralized exchanges were marketed as business partners by CLS Global, it was found that Uniswap was the only one used as a venue for the operation.