The troubles surrounding Bitcoin are not letting up anytime soon. In fact, it seems they are just starting to come up. Crypto regulation hits hard as the price of the cryptocurrency continues its bearish run. Investigations have begun by US regulators to ascertain if market manipulation led to its record-breaking prices last year.

The US Justice Department is investigating whether tether, a stablecoin claimed to be backed 1:1 by the US dollar, was used to support Bitcoin prices. Bloomberg reports that federal prosecutors launched a criminal probe earlier this year. They suspect Bitfinex traders may have used tether to coordinate illegal Bitcoin price moves.

Bitfinex and tether, which share many executives, were subpoenaed by the Commodity Futures Trading Commission (CFTC) in December. They must prove the tokens are backed by US dollar reserves. Alleged market tricks include “spoofing,” where fake orders are placed to push prices to a certain level before being withdrawn.

Crypto Regulation Hits Hard

In recent weeks, certain aspects of digital currency have come under the sledgehammer of US agencies. The Securities and Exchange Commission (SEC), for one, announced its first-ever civil penalties against crypto founders for failing to register their initial coin offerings (ICOs). The incident, which took place last Friday, was just one in a series of a regulatory and legal campaign aimed at fraudulent activities and abuses in the crypto industry.

It is not only regulators that are side-eyeing the role of tether on Bitcoin.

John Griffin, a finance professor at the University of Texas, who is renowned for identifying financial fraud and Amin Shams, a graduate student, published a study back in June that said: “at least half of the jump in Bitcoin was due to coordinated price manipulation.”
>The authors stated in their paper that “tether was used to buy Bitcoin at key moments when it was declining, which helped stabilize and manipulate the price of the cryptocurrency.”

In conclusion

More woes continue to surround Bitcoin and this time it involves last year’s record-breaking rally. US regulators are currently investigating whether tether was used to illegally prop up the prices of the Bitcoin. Federal prosecutors who began probing early this year suspect that traders on Bitfinex may have been moving Bitcoin prices illegally.

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