One of the news stories that has been making headlines in recent days is how federal authorities in the United States joined forces to dismantle crypto companies and people who were committing fraud through market manipulation. In addition, for the first time, there was direct involvement of the FBI with digital assets. How were these bad actors in the market caught? Let's explore.

According to Reuters, on October 9, federal authorities managed to charge 15 individuals and three crypto companies with price manipulation and “wash trading” (a practice known to create false volume) in the digital asset industry.

These charges were brought as a result of collaboration in investigations by federal authorities such as the Department of Justice (DOJ), the United States Securities and Exchange Commission (#SEC ) and the Federal Bureau of Investigation (FBI).

What caught the attention of the crypto community is that in order to carry out these investigations and see up close how market manipulators work, the FBI had a direct involvement by creating a crypto company called NexFundAI. But it doesn't end there, this company also planned to launch a #token to the market on the #Ethereum network.

That is where bad companies come in, offering to help manipulate the market, prosecutors say.

But how do these bad crypto companies work?

These companies offer to perform “wash trading” operations, which causes prices to be artificially inflated and this in turn attracts new investors in the process. Once an “agreed” maximum price is reached, they start selling large quantities, leaving other investors with losses. This is what is commonly known today as “pump & dump” in memecoins.

Thus, with this case, around $25 million dollars in cryptocurrencies have been seized, according to the Department of Justice.

In addition, arrests have been made in different parts of the world, as different organizations are involved in this type of fraud.

As an additional note, this is the first time that criminal charges have been brought against financial services companies for market manipulation and wash trading in the cryptocurrency industry.

This would set a precedent and a warning to other companies that are providing these types of services, harming investors. I think they were finally able to dismantle one of the many organizations that we see today in the crypto market. Those behind the memecoins will be a little more careful. That is why I always recommend doing your own research on the tokens they have in their sights. And once again, entering the memecoins is like going to gamble at a casino, where luck can be on your side and you can win a lot or lose everything.

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