On October 9, the U.S. Federal Bureau of Investigation (FBI) announced an “unprecedented” move to create the virtual currency token NexFundAI in order to arrest individuals accused of manipulating virtual currency markets and inflating the value of the tokens. It was announced that measures had been taken.
However, concerns have surfaced regarding smart contracts associated with NexFundAI, with analysts pointing to potential copyright infringement and unintentional exposure of FBI-controlled wallets.
FBI token
Earlier this year, authorities revealed that market maker ZM Quant was hired to support NexFundAI trading.
The token was promoted as an investment vehicle for early-stage AI projects. Federal authorities later accused ZM Quant of advising NexFundAI backers on how to artificially inflate the price of their tokens and create a pump-and-dump scheme.
ZM quant accounted for over 80% of NexFundAI's trading volume in May. Unbeknownst to market makers, NexFundAI was participating in a federal sting operation to uncover fraudulent cryptocurrency transactions.
The authorities highlighted that ZM Quanto explained how its trading bots can execute up to 20 trades per minute, inflating the price and trading volume of the token. ZM Quant allegedly used multiple wallets to make transactions appear legitimate.
NexFundAI just traded on May 31 with $4,600 in artificial volume.
Copyright concerns
On-chain investigators have flagged possible copyright infringement related to the FBI's NexFundAI token.
On October 9, a pseudonymous developer known as “cygaar” claimed that the smart contract for the FBI's token violated the MIT License and opened the door to copyright infringement claims.
The developer noted that the FBI appears to have copied several OpenZeppelin libraries without complying with the MIT license requirement, which requires all significant parts of the software to include permission notices.
According to Cygaar:
“[The FBI]apparently copy-pasted some of OpenZeppelin's libraries (which use the MIT license), but they themselves do not have a license for the code.”
Developers noted that while legal action is unlikely, the situation highlights a cynical oversight by the FBI.
anonymized wallet
In addition to copyright concerns, the FBI inadvertently made the wallet public, which could potentially impact investigations into other cases.
coinbase Director Conor Grogan NexFundAI revealed that this wallet was used to distribute funds across multiple wallets and execute transactions.
Grogan also discovered that these wallets had recently transferred funds to platforms such as Binance, Tokenlon, Zixipay, and HTX. One wallet reportedly stores tokens such as EthereumMax and Shiba Mr. Dog “Pornrocket” with BONE and 1.734 billion tokens.
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