The U.S. government revealed on Wednesday that the Federal Bureau of Investigation (FBI) created a cryptocurrency during its investigation into price manipulation in the cryptocurrency market. The FBI's Ethereum-based token was created with the assistance of a "cooperating witness."

The investigation results show that the U.S. Securities and Exchange Commission has charged three "market makers" and nine individuals with allegedly participating in a scheme to artificially inflate the prices of certain crypto assets. The Department of Justice has charged individuals and entities with "widespread fraud and manipulation" in the crypto market. Prosecutors claim that the defendants are accused of making false claims about their tokens and conducting so-called "fake trades" to create the illusion of an active trading market.

Three market makers -, -, and - are suspected of conducting false trades or colluding to conduct false trades on behalf of , which is an Ethereum-based token, without realizing that it was created by .

FBI Boston Division Special Agent Jodi Cohen said in a statement, "What the FBI uncovered in this case is essentially a new variant of traditional financial crime." "The facts of the crime we discovered have led to charges against the leadership of four cryptocurrency companies and four cryptocurrency 'market makers' and their employees, who are accused of leading a complex trading scheme that allegedly defrauded honest investors out of millions of dollars."

The alleged "market maker" Liu Zhou told the initiator of the project that it was superior to its competitors because they "control the manipulation and dumping," allowing them to "easily engage in insider trading."

The FBI spokesperson told that the trading activity of the token is limited, but did not disclose more information. According to reports, the Acting U.S. Attorney for the District of Massachusetts said at a press conference on Wednesday that trading of the token has been banned. It is reported that the U.S. Department of Justice has obtained $1 million from "fraud proceeds" and will return it to investors.

Eighteen individuals and entities have been charged with large-scale fraud and manipulation in the cryptocurrency market. Boston announced charges against leaders and employees of four cryptocurrency companies and four cryptocurrency financial services companies, referred to as "market makers." Four defendants have pleaded guilty, another defendant has agreed to plead guilty, and authorities arrested three additional defendants this week in Texas, the UK, and Portugal.

Over $100,000 worth of cryptocurrency has been seized, and multiple trading bots responsible for millions of dollars in fraudulent transactions involving approximately 100 different cryptocurrencies have been deactivated.

According to the indictment, the defendant, who created a cryptocurrency company, made false statements about their cryptocurrency ("tokens") and engaged in deceptive trading practices ("wash trading") to create a false impression of trading activity, making the tokens appear to be a good investment. These deceptive tactics allegedly attracted new investors and buyers, leading to an increase in the trading price of the tokens. The defendant is subsequently accused of selling their tokens at artificially inflated prices, a fraudulent practice commonly referred to as "pumping and dumping."

The largest cryptocurrency company in Saitama once boasted a market capitalization of billions of dollars. Allegedly, these cryptocurrency companies also employed financial services firms ("market makers") to engage in wash trading in exchange for compensation. A market maker defendant who agreed to plead guilty described this practice to a potential client: "The goal of the secondary market" is to find "other buyers in the community, those you don't know or care about," because "we must make other buyers lose money to profit."

Three market makers —— , , and —— along with their employees, have been accused of engaging in fraudulent trading and/or conspiring to engage in fraudulent trading on behalf of , a cryptocurrency company and token, which was created under the direction of law enforcement as part of a government investigation. A fourth market maker, , its CEO, and two directors have also been charged for implementing a similar scheme.

Market manipulation offenses can result in a maximum prison sentence of years, a maximum of years of supervised release, a fine of up to million dollars or twice the amount of the gain or loss from the offense, and forfeiture of property. Telecommunications fraud offenses can result in a maximum prison sentence of years, a maximum of years of supervised release, a fine of up to million dollars or twice the amount of the gain or loss from the offense, and restitution and forfeiture of property. Conspiracy to commit telecommunications fraud, market manipulation, and/or engage in unlicensed money transmitting business offenses can result in a maximum prison sentence of years, a maximum of years of supervised release, a fine of up to million dollars or twice the amount of the gain or loss from the offense, and restitution and forfeiture of property. Conspiracy to commit money laundering offenses can result in a maximum prison sentence of years, years of supervised release, a fine of million dollars or twice the value of the property involved in the offense (whichever is greater), and forfeiture of property. The penalties are imposed by federal district court judges in accordance with the United States Sentencing Guidelines and the statutes governing sentencing in criminal cases.