High market volatility last year, and especially the epic Bitcoin rally in December, became the reason for the US Department of Justice to investigate the activities of the Bitfinex crypto exchange and the Tether Ltd team.
Federal prosecutors suspect that an intricate network involving Bitcoin, Tether and Bitfinex may have been used to illegally manipulate market prices.
The Justice Department's suspicions add to an existing investigation by the U.S. Commodity Futures Trading Commission (CFTC), which began last year.
Both Tether Ltd. and Bitfinex are suspected of market manipulation of digital assets and creating artificial activity in the cryptocurrency market to pump up their price through the Tether stemcoin. Regulators suggest that Tether is used to buy Bitcoin at critical moments when the value of digital tokens falls
The main question that the Justice Department investigation is trying to answer is whether the sharp rise in the value of digital assets in recent years was solely driven by actual demand or artificially created market tricks. Along with the CFTC, prosecutors have been looking into a range of trading strategies, including spoofing - the illegal practice of flooding the market with fake orders to trick other traders into buying or selling an asset. Thus, according to regulators, Tether could have been used to buy Bitcoin at crucial periods in 2017, and that a sharp jump in the value of Bitcoin, by 1,400 percent last year, was associated with such illegal manipulations.
Among the issues being considered by the Department of Justice is the issue of new coins Tether Ltd. and their release to the market mainly through Bitfinex. The inspectors are suspicious of the overall management team of Tether Ltd and Bitfinex in Hong Kong.
Neither the Department of Justice nor the CFTC has made official comments on the progress of the investigation and, as far as we know, no charges have been brought yet. Representatives of Tether Ltd and Bitfinex also remain silent. How long it will take to study the influence of crypto exchanges and stable coins on the sharp rallies in the Bitcoin rate is still unknown.
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