CLS Global FZC LLC has agreed to plead guilty to market manipulation and wire fraud, paying a $428,059 penalty. The UAE firm was caught by FBI agents in an undercover operation, accused of inflating trading volumes to attract U.S. investors.
On January 21, the U.S. Department of Justice (DOJ) declared that CLS Global FZC LLC has consented to enter a guilty plea to one count of conspiracy to commit wire fraud and market manipulation.
CLS Global to Pay Fine
CLS Global will pay a $428,059 penalty, which will consist of seized bitcoin and an undisclosed fee, if the court accepts the plea agreement.
The plea deal also prohibits CLS Global from engaging in U.S. cryptocurrency markets, according to the DOJ statement. Claims that CLS Global misrepresented its bitcoin trading volumes to entice investors are the basis for the charges against the company.
It is also alleged that the market maker registered in the UAE encouraged the practice to investors in the United States.
The Department of Justice claims that undercover FBI agents used a phony cryptocurrency corporation called Nexfundai to trap CLS Global. An Ethereum-based cryptocurrency that was exchanged on Uniswap was used in the undercover operation.
According to reports, an unidentified employee described in a videoconference how CLS Global generates the trading volumes required to satisfy exchange listing criteria using a “algorithm.”
The employee allegedly knew the activity was illegal and boasted about how difficult it was to trace the wash trading.
“It’s very hard to track. . . . We’ve been doing that for many clients. I know that it’s wash trading and I know people might not be happy about it,” the employee said.
CLS Global reportedly consented to refrain from using cryptocurrency trading platforms accessible to U.S. investors as part of its deal with the DOJ. Additionally, it committed to certifying annually that its operations comply with the terms of the plea deal.
The statement also disclosed that the U.S. Securities and Exchange Commission (SEC) is pursuing a civil enforcement action against the UAE-registered business for allegedly violating securities law.
The DOJ statement further stated that the money that was taken from or paid by CLS Global will be credited in the SEC settlement and vice versa.
