Earlier this year, there were reports that the U.S. Department of Justice had launched a criminal probe into the cryptocurrency industry, focusing on spoofing, wash trading, and other illegal practices. This week, Bloomberg reported that the DOJ is now examining whether Tether trading played a role in illegally manipulating prices for the world’s most well-known digital currency:
A focus of the Justice Department’s investigation is whether the dramatic rise of digital tokens in recent years was purely driven by actual demand, or was partially fanned on by market tricks.
The investigators are reportedly looking at the controversial relationship between Tether, the Bitfinex exchange, and Bitcoin:
Bitfinex has the same management team as Tether Ltd., a Hong Kong-based company that created the namesake cryptocurrency. When new coins come to market, they’re mostly released on Bitfinex.
Some traders -- as well as academics -- have alleged that these Tethers are used to buy Bitcoin at crucial moments when the value of the more ubiquitous digital token dips. JL van der Velde, the chief executive officer of Tether Ltd. and Bitfinex, has previously rejected such claims.
The DOJ investigation is being coordinated with the U.S. Commodity Futures Trading Commission, which has been investigating Bitfinex and Tether since 2017. According to Bloomberg, which based its report on “three people familiar with the matter,” DOJ and CFTC spokespersons have declined to comment.