SEC Sting Bars UAE Crypto Market Maker CLS Global for 98% Wash Trades, $425K Fine

Key Takeaways: The SEC’s victory against CLS Global demonstrates that U.S. regulators can successfully prosecute foreign firms for market manipulation, even when the activity occurs on decentralized platforms like Uniswap. The case’s undercover “trap token” operation, orchestrated by the FBI, is part of a new era of sophisticated enforcement tools targeting wash trading and deceptive practices that artificially inflate trading volumes and mislead investors. This judgment not only bans CLS Global from U.S. crypto markets but also sends a strong warning to global market makers that the use of manipulative trading tactics will face severe legal and financial consequences. The U.S. Securities and Exchange Commission (SEC) has secured a final judgment in its market manipulation case against CLS Global FZC LLC, a UAE-based crypto market maker. The ruling, issued by the U.S. District Court for the District of Massachusetts on April 7, 2025, concludes a closely watched case involving fraudulent trading practices in the digital asset market. CLS Global Barred from U.S. Crypto Activity After SEC Win in NexFundAI Wash Trading Case CLS Global, which describes itself as a crypto asset market maker, was accused by the SEC of orchestrating a scheme to manipulate the market for a crypto asset known as “ NexFundAI .” The SEC alleged that the firm created a false appearance of active trading to mislead retail investors into believing there was real market demand for the token, an asset the agency classified as a security. Source: SEC website According to the SEC’s complaint, CLS Global engaged in wash trading strategies that accounted for approximately 98% of NexFundAI’s total trading volume during the relevant period. These trades were reportedly executed on Uniswap, a decentralized exchange, and were intended to inflate volume and deceive investors artificially. The final judgment, which CLS Global consented to without admitting or denying the allegations, includes an injunction prohibiting future violations of U.S. securities laws. The firm must pay a $425,000 civil penalty, disgorge $3,000 in profits, and pay $80.39 in prejudgment interest. The ruling also mandates strict compliance measures, including a ban on CLS Global conducting business with U.S. persons or entities. The company is required to implement new client screening procedures within 30 days and submit annual compliance certifications to the SEC for the next three years. This civil resolution follows CLS Global’s guilty plea in a parallel criminal case, announced in January 2025, led by the U.S. Department of Justice. In that case, the FBI revealed it had created NexFundAI as a “trap token” designed to expose fraudulent market-making activity. CLS Global was among several firms caught manipulating trading volumes during the sting operation. NonWitnessNews Report FBI OUTSMARTS CRYPTO FRAUDSTERS WITH THEIR OWN TOKEN Imagine getting scammed by the FBI… LOL That’s exactly what happened when CLS Global fell for a fake crypto token, NexFundAI, set up to catch scammers in the act. CLS Global took the bait,… pic.twitter.com/6rWkSBRUXk — Ven Doe (@XsyLocke) January 26, 2025 “With this final judgment, the SEC reinforces its commitment to holding market manipulators accountable and protecting investors from deceptive practices,” said David D’Addio, one of the SEC attorneys involved in the case. The case is seen as a major regulatory victory in the broader crackdown on crypto-related fraud. It also indicates the increasing use of advanced enforcement tactics, such as trap tokens, to detect and deter misconduct in decentralized finance markets. SEC Case Shows Growing Crackdown on Market Manipulation in Crypto The SEC’s victory over CLS Global builds on earlier civil fraud charges filed in October 2024 against the firm and its employee, Andrey Zhorzhes. Prosecutors alleged that CLS’s manipulation was not a one-off incident, but rather part of a larger trend in crypto markets. A January 2025 Chainalysis report estimates that more than $2.6 billion in annual wash trading occurs, roughly 2% of total daily crypto volumes, according to CoinGecko . Source: Chainalysis Market makers, meant to provide liquidity and stabilize prices, have come under increasing scrutiny. While CLS positioned itself as a gap-filler in crypto market-making, regulators argue that some firms are misusing the role to distort markets. Recent history supports those concerns. Celsius executives were accused in 2023 of using Wintermute to prop up the value of their token. In 2024, Binance also dismissed an employee who had flagged possible manipulation by DWF Labs, allegedly tied to $300 million in pump-and-dump activity involving tokens such as $YGG. The issue isn’t isolated to trading firms alone; earlier this year, the CFTC secured a $130 million judgment against the founders of EmpiresX for running a fraudulent investment scheme, adding to the intensifying regulatory focus on market abuse in the crypto sector. Frequently Asked Questions (FAQs) What does the CLS Global case reveal to DeFi enthusiasts? It exposes how easy trading bots and algorithms can be used to fake activity on decentralized markets, making vigilance and transparency essential for both platforms and users. Could this ruling impact the global reach of crypto market makers? Yes, stricter compliance and screening requirements may push firms to reassess their cross-border operations and client vetting, particularly when serving U.S. or other regulated markets. What other lesson does this case offer to retail investors? It shows the importance of skepticism toward artificial trading volume and the need for due diligence, as old financial fraud tactics are being repackaged for the digital age. How might this case shape future regulatory collaboration internationally? As crypto markets span borders, the CLS Global case could inspire more coordinated global crackdowns on manipulation. The post SEC Sting Bars UAE Crypto Market Maker CLS Global for 98% Wash Trades, $425K Fine appeared first on Cryptonews .