We all knew that day would come. We just didn’t know it’d be so early when the US Department of Justice (DOJ) would open a criminal probe into potential Bitcoin price manipulation.
The Bloomberg reports the DOJ is working with Commodities and Futures Trading Commission (FTC), which oversees cryptocurrency derivatives, to investigate potential Bitcoin price manipulation.
Investigators will focus on illegal moves, such as: 1. “spoofing” where false orders are placed on exchanges and then withdrawn with the aim to manipulate prices in an attempt to lure naïve consumers into buying or selling, and 2. “wash trading” where market participants trade with themselves to create the illusion of bustling market activity.
Such activities may have provided bad actors the opportunity to manipulate Bitcoin price. Spooking and wash trading are considered illegal in mainstream regulated markets such as equities and futures.
A Business Insider investigation last year found that “pump and dump” scams are common in cryptocurrency markets. In pump and dump scams, bad actors pump a price of a certain cryptocurrency by bidding up the price before “dumping” it on unsuspecting traders who are lured into the market by pumpers who say the value is only going to increase.
In April, a group of cryptocurrency influencers was reported to the FBI and the US Securities and Exchange Commission (SEC) for orchestrating these pump and dump schemes.
An anonymous Twitter account Bitfinex’ed, which has over 38,000 followers, has repeatedly drawn attention to alleged instances of spoofing and wash trading, calling for actions from US regulators. Bitfinex’ed claims “Spoofy,” a single entity is dominating Bitcoin’s price. Bitfinex, the largest Bitcoin exchange program, has also tried to stifle Bitfinex'ed on Twitter by hiring bots to mass report his tweets and accounts. It's hard to believe that the world's first most popular cryptocurrency may go down in the history books as the hotbed of nefarious activities.
The criminal probe, which is in its early stages, will focus on Bitcoin, Ether, Ripple, and other major cryptocurrencies.
Bitcoin enthusiasts have long believed that its price is actively being manipulated. According to CryptoCompare, Bitcoin has fallen from $20,000 an all-time high in mid-December to $7,399 at press time.
Critics claim Bitcoin’s bearish period, which has seen its various odd patterns, is evidence of price manipulation.