DOJ Launches Criminal Probe Into Bitcoin Price Manipulation
by Tyler Durden
ZeroHedge.com
Thu, 05/24/2018
After months of the SEC and the CFTC pursuing civil cases against individual initial coin offerings that had scammed investors out of millions, it looks like the Department of Justice is now ready to take the government’s crackdown against bitcoin to the next level by chasing down allegations of market manipulation in bitcoin and other popular cryptocurrencies.
According to Bloomberg, the DOJ has opened a criminal investigation into whether large bitcoin traders – so-called “whales” – are manipulating the price of bitcoin. Market manipulation has been an increasingly popular topic in crypto world – particularly since prices started their historic surge.
Last summer, the SEC established the legal precedent that all digital tokens should be treated like legitimate securities and required them to be registered with the agency. Meanwhile, the CFTC, which is also working with the DOJ, declared bitcoin a commodity back in 2015, and is responsible for regulating bitcoin futures.
Investigators will likely look to bring charges against traders who engaged in spoofing – flooding the market with fake orders to push a price up or down depending on one’s position. Another illicit tactic that the DOJ is looking into is called wash trading, which is also prevalent in equity and futures markets. Wash traders trade with themselves to create the illusion of volume in an otherwise illiquid market.
The probe is reportedly focusing on bitcoin and ether, according to Bloomberg’s sources.
The investigation, which the people said is in its early stages, is the US’s latest effort to crack down on an industry that was initially embraced by those who were distrustful of banks and government control over monetary policy.
But Bitcoin’s meteoric rise – it surged to almost $20,000 in 2017 after starting the year below $1,000 – has been a lure for mom-and-pop investors. That’s prompted regulators to grow concerned that people are jumping into cryptocurrencies without knowing the risks. For instance, the Securities and Exchange Commission has opened dozens of investigations into initial coin offerings, in which companies sell digital tokens that can be redeemed for goods and services, due to suspicions that many are scams.
Cryptocurrency trading is fragmented on dozens of platforms across the globe, and many aren’t registered with the CFTC or SEC. As a derivatives watchdog, the CFTC doesn’t regulate what’s known as the spot market for digital tokens — which is the trading of actual coins rather than futures linked to them. But if the agency finds fraud in spot markets, it does have authority to impose sanctions.
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