US Justice Department Probes Tether for Bitcoin Price Manipulation

Marco Green
November 21, 2018

While federal prosecutors opened a criminal probe into cryptocurrencies months ago, according to Bloomberg, suspicions are looming on whether Tether - another digital token - and the crypto exchange Bitfinex - may have been used by traders to illegally move up prices.

As mentioned, some crypto market analysts have alleged that large amounts of USDT are used to purchase bitcoin at key moments (based on insider information), particularly when its price dips, in order to unfairly profit off of arbitrage and market fluctuations.

While no formal accusations have yet been made, the US Department of Justice (DoJ) is investigating the pair's potential role in fuelling Bitcoin's all-time price highs of $20,000 in December 2017. This DOJ probe is in addition to an on-going inquiry by CFTC into the activities of Tether Ltd and Bitfinex. According to sources familiar with the matter, the CFTC and the DoJ are now coordinating their investigation of the activities of both firms. Both Tether and Bitfinex share the same management team, which appears to be at the center of the investigation.

Giving further details, Bloomberg reports that the DOJ's inquiry is primarily to determine if the sudden rise of virtual currencies is a result of actual demand or partially influenced by market manipulation.

At present, it is unclear whether authorities are only looking into the potentially exploitative trading activity involving Hong Kong-operated Bitfinex, or if regulators also suspect that the exchange's senior executives may have been involved in illegal conduct.

Uncertainty surrounding Tether recently led to the price of Bitcoin becoming out of sync across cryptocurrency exchanges, depending on if the exchange offered a trading pair against BTC tied to Tether, or tied to Dollars.

In the research paper, Professor John M. Griffin and Amin Shams claim that Tether is used to stabilize and manipulate Bitcoin prices.

As Bitcoin loses over 30 percent this week, monitors have noted mass transfers of Tether's USDT tokens, including a batch of 50 million Tuesday from the Tether Treasury to Bitfinex. Prices temporarily dropped in October over fears that the company did not have the reserves to back up all its coins in the market.

Featured image from Shutterstock.

Other reports by Click Lancashire

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