Feds Launch Investigation into Alleged Bitcoin Price Manipulation
The troubles surrounding Bitcoin are not letting up anytime soon. In fact, it seems they are just starting to come up. 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 investigation, which is being carried out by the US Justice Department, is checking to see whether tether, a controversial stablecoin whose owners claim is backed 1:1 by the US dollar, was used by cryptocurrency traders to prop up Bitcoin.
According to reports from Bloomberg, a criminal probe into the digital currency was launched by federal prosecutors early this year. One suspicion that has arisen out of the probe is that traders on Bitfinex, a cryptocurrency exchange, “might have been using tether to coordinate Bitcoin price moves illegally.”
Bitfinex and tether, who share most of the same executives between them, were also subpoenaed by the Commodity Futures Trading Commission (CFTC) in December so they can prove that the “tokens are actually backed by a reserve of US dollars. The market tricks that are alleged to be involved include “spoofing, or placing fake orders until the price hits a certain level, then pulling those orders.”
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.”
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.
For more on this story and other developments in the crypto-sphere, subscribe to the ICOholder’s newsletter.