CLS Scams: How Aiden Labs and Others Fell Victim to Market Maker Fraud with Real-World Impact
The crypto landscape is fraught with risks, one of the most insidious being fraudulent market makers. CLS (CoinLiquidity) has emerged as a significant threat, exploiting projects under the guise of providing legitimate market-making services. At Aiden Labs, we’ve directly experienced the devastation CLS can cause. Drawing on our experience and the experiences of others, this article exposes the tactics used by CLS and offers guidance to protect your project.
Aiden Labs is committed to transparency and community. We will continue to share our experiences and learnings to help others navigate the complexities of the crypto world.
Understanding CLS (CoinLiquidity) Fraud
CLS presents itself as a market maker, promising to stabilize token prices and enhance liquidity through order book management. In reality, CLS engages in deceptive practices that undermine projects.
How CLS Operates:
Initial Contact: CLS reaches out to projects, offering its services as a market maker. They establish a contractual agreement with subscription fees.
Infiltration and Monitoring: Once hired, CLS monitors project activities, identifying vulnerabilities and optimal times for manipulation.
Bot-Driven Wash Trading: Instead of fulfilling their promise of filling the order book with genuine buy and sell orders, CLS employs bots to conduct wash trading. This involves artificially inflating trading volumes and manipulating token prices against the project’s liquidity.
Price Manipulation: CLS strategically lowers token prices, creating opportunities to buy low and sell high. This practice destabilizes projects and can trigger forced refunds by launchpads, weakening the project’s financial standing.
Rug Pull Orchestration: By draining liquidity and artificially suppressing prices, CLS sets the stage for a rug pull. The project, now financially vulnerable, faces delisting notices from exchanges due to zero order book liquidity.
Case Studies
CoinMarketCap
Ayesha Aziz
Fri, April 4, 2025 at 8:04 AM GMT+7
CLS Global, a UAE-based financial services firm, has been fined $428,059 after admitting to wash trading in U.S. cryptocurrency markets. The firm pleaded guilty to market manipulation and wire fraud charges after a sting operation led by the FBI. The charges relate to CLS Global’s role in manipulating cryptocurrency trading volumes to attract investors.
Read: https://finance.yahoo.com/news/uae-based-crypto-firm-cls-010409998.html
Binance
Aiden Labs
Like many others, we contracted with CLS to provide market-making services. We soon discovered that CLS was actively manipulating our token's price and liquidity, rather than providing the support is it should be. This resulted in significant instability and damage to our community's trust.
Revlon Case
Revlon contracted CLS (CoinLiquidity) for 3 months at a subscription fee of $10,000. Instead of providing genuine market-making services, CLS:
Used bots for wash trading against the project's liquidity.
Intentionally lowered the token price to buy low and sell high, forcing launchpads to issue refunds.
Failed to fill the order book with ASK/BID orders, resulting in zero liquidity.
The project was delisted from MEXC after only 6 days due to these fraudulent activities.
Verified Sources
The deceptive practices of CLS have been verified by reputable sources, including Scam Watcher, TheWhalePUMP, and ZachXBT. These independent investigations have confirmed the damaging impact of CLS on multiple projects.
The Devastating Impact
CLS fraud has far-reaching consequences:
Financial Losses: Projects suffer direct financial losses due to price manipulation and drained liquidity.
Loss of Investor Trust: The artificial price manipulation and lack of genuine trading activity erodes investor confidence.
Delisting from Exchanges: Tokens may be delisted from exchanges due to insufficient liquidity and wash trading violations.
Legal and Reputational Damage: Projects face legal challenges and reputational damage, impacting their long-term viability.
How to Protect Your Project
Due Diligence: Before contracting with a market maker, conduct thorough due diligence. Research their history, reputation, and client testimonials.
Contractual Safeguards: Ensure contracts include clear performance metrics, audit rights, and termination clauses in case of non-compliance or suspicious activity.
Real-Time Monitoring: Continuously monitor trading activity, order book depth, and price movements to detect any signs of manipulation.
Community Awareness: Educate your community about the risks of market maker fraud and encourage them to report any suspicious activity.
Moving Forward
The crypto community must unite to combat fraudulent actors like CLS. By sharing information, conducting due diligence, and implementing robust safeguards, we can protect our projects and build a more trustworthy ecosystem.
Aiden Labs is committed to transparency and community. We will continue to share our experiences and learnings to help others navigate the complexities of the crypto world.
Resource: https://www.sec.gov/files/litigation/complaints/2024/comp-pr2024-166-cls.pdf
, https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26154, https://www.justice.gov/usao-ma/pr/cryptocurrency-financial-services-firm-agrees-plead-guilty-charges-related.
