The FBI created a digital currency on the Ethereum platform to track, detect and charge dozens of people with "pump and dump" and fraud schemes.

The US government released the results of the Federal Bureau of Investigation (FBI) investigation into the cryptocurrency market manipulation scheme, revealing that the agency created the NexFundAI coin "with the cooperation of several witnesses".

As a result, the US Securities and Exchange Commission (SEC) has charged three “market makers” and nine others with conspiring to inflate the prices of several cryptocurrencies. The US Department of Justice has also charged 18 individuals and organizations in the cryptocurrency market with “fraud and manipulation”.

The suspects spread fake news and traded their tokens to create the illusion of active markets. Three “market makers” — ZMQuant, CLS Global, and MyTrade — are believed to have pumped and dumped NexFundAI without knowing that the cryptocurrency was created by the FBI.

Pump and dump means that some people will buy a large amount of cryptocurrency from a low-value project, combined with spreading news to create a fear of missing out (FOMO) mentality. This mentality causes many others to rush to buy, thereby causing the price of the cryptocurrency to skyrocket. When reaching a certain threshold, the initial group of buyers will sell all the tokens they are holding, making a profit, while causing the price of the token to plummet. The later buyers will become victims because their coins lose value.

"The investigation resulted in indictments against the executives of four cryptocurrency companies and their employees who allegedly facilitated a fraudulent trading scheme that resulted in millions of dollars in losses for participants," said Jodi Cohen, special agent in charge of the FBI's Boston office.

An FBI spokesperson said NexFundAI’s trading activity was limited, but did not provide further details. Acting U.S. Attorney for the District of Massachusetts Joshua Levy said trading on the cryptocurrency has been disabled.

The US Department of Justice announced that it had seized $25 million from the fraudulent transactions and would return it to those involved.

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