The United States’ Justice Department is investigating Bitcoin price manipulation on exchanges.
According to Bloomberg report, spectacular spoofing and wash-trading practices largely regarded as par-for-the-course among early crypto traders are coming under the scrutiny of the US Department of Justice and its partner, the Commodity Futures Trading Commission.
Better regulation of the cryptocurrency markets is largely regarded as a necessary precursor for institutional money managers to begin trading there.
Further, the investigation is said to be particularly focussed on wash trading, where traders on minimally-regulated exchanges with relatively low liquidity pools of cryptocoins trade back and forth to themselves to create the illusion of demand for a particular coin.
US regulators, says Bloomberg, have discouraged these practices in regular capital markets by requiring exchanges to monitor and prevent manipulation. Until very recently, many cryptocurrency exchanges functioned under the regulatory radar.
They barely conducted identity checks on customers, let alone stepped in to intervene on spoofing and wash trading.
The anonymous blogger calling him or herself “Bitfinex’ed” has been documenting and alleging questionable trading practices on the Bitfinex exchange for over a year.
Many, charts assembled on Twitter, YouTube and at Medium by “Bitfinex’ed” seem to indicate rampant trade manipulation at the exchange.
The Bitfinex exchange is closely associated with Tether, a company that produces a so-called “stable coin” cryptocurrency by the same name.
The Tether company has allegedly failed to produce any credible audits despite indications that it does hundreds of millions of dollars worth of business every quarter.
In December of last year, the CFTC sent subpoenas to both the Bitfinex exchange and Tether. Despite this, the “printing” of tethers has barely slowed at all.