May 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…