On October 9, the U.S. Federal Bureau of Investigations (FBI) announced a groundbreaking initiative: the creation of a crypto token named NexFundAI. This token aims to identify individuals suspected of manipulating cryptocurrency markets and inflating token values.
Concerns Over Smart Contracts
Despite its intentions, the smart contract associated with NexFundAI has raised significant concerns. Analysts have highlighted possible copyright infringements and the unintended exposure of FBI-controlled wallets.
The FBI Token
Earlier this year, authorities disclosed that ZM Quant, a market maker, was enlisted to facilitate trading for NexFundAI. The token was marketed as an investment opportunity for early-stage AI projects. However, federal authorities later accused ZM Quant of advising NexFundAI’s backers on methods to artificially inflate the token’s price, essentially engaging in a pump-and-dump scheme.
In May, ZM Quant accounted for more than 80% of NexFundAI’s trading volume. Unbeknownst to the market maker, NexFundAI was involved in a federal sting operation aimed at exposing fraudulent trading practices in the crypto sector. Authorities revealed that ZM Quant demonstrated how its trading bots could execute up to 20 trades per minute, resulting in inflated token prices and trading volumes. Allegedly, ZM Quant utilized multiple wallets to lend legitimacy to these transactions. On May 31, NexFundAI was only traded once, generating a mere $4,600 in artificial volume.
Copyright Concerns
On-chain analysts have flagged potential copyright issues related to the FBI’s NexFundAI token. On October 9, a pseudonymous developer known as “cygaar” claimed that the smart contracts for the FBI token violated the MIT License, which could lead to copyright infringement allegations.
Cygaar asserted that the FBI seemed to have replicated several OpenZeppelin libraries without complying with MIT License requirements, which stipulate the inclusion of a permission notice in significant portions of the software. Cygaar stated:
“[The FBI] clearly copy-pasted several of OpenZeppelin’s libraries (which use the MIT License), but don’t have a license on the code yourself.”
Although the likelihood of legal action appears low, this situation underscores a notable oversight by the FBI.
Doxxed Wallets
In addition to copyright issues, the FBI inadvertently exposed its wallets, which may affect ongoing investigations into other cases. Coinbase director Conor Grogan noted that the wallet used to fund NexFundAI distributed assets across several wallets and executed trades.
Grogan discovered that these wallets had recently transferred funds to various platforms, including Binance, Tokenlon, Zixipay, and HTX. One wallet reportedly contains tokens such as EthereumMax, Shiba Inu’s BONE, and a staggering 1.734 billion tokens of “Pornrocket.”
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