In May 2018, the US Department of Justice was carrying out a criminal investigation into a possible involvement of traders in manipulating the prices of Bitcoin last December when it reached the all-time highs. Recently, the attorneys have come up with a new suspicion: crypto exchange Bitfinex and Tether, which share a management team, may have pushed bitcoin’s price up using the stablecoin. Currently, the investigation is carried out.
As Bloomberg reported, the US Department of Justice is inquiring whether Tether and Bitfinex engaged in illicit trading activities aimed at driving up the price of Bitcoin last year. This probe coincides with an on-going inquiry by Commodity Futures Trading Commission into the activities of Tether Ltd and Bitfinex. The two government bodies will now commence a coordinated investigation into both cryptocurrency firms.
The details of the investigation have not been revealed and it is unclear, whether only trading activities on the Bitfinex platform are examined, or the executives of the exchange as well. The report reads:
“It couldn’t be determined whether government officials are solely investigating activity that occurred on Bitfinex or if exchange executives are suspected of illegal behavior. Neither the Justice Department nor the CFTC has accused anyone of wrongdoing, and authorities may ultimately conclude that nothing illicit occurred.”
As far as the current market situation is concerned, a major correction took place on Monday. The market lost $25 billion market cap for the second time in last one week. Bitcoin reached a new one-year low, going below $5000.
This is the not the first time Tether’s and Bitfinex’s name has been linked to the bitcoin price manipulation. In June of this year, a finance professor at Texas University evaluated the role of Tether in the inflated prices of bitcoin and other cryptocurrencies last year. By using algorithms, the research found a significant association of Tether in the price spike. The report stated:
“By mapping the blockchains of bitcoin and tether, we are able to establish that entities associated with the Bitfinex exchange use tether to purchase bitcoin when prices are falling. Such price supporting activities are successful, as Bitcoin prices rise following the periods of intervention. These effects are present only after negative returns and periods following the printing of tether.”
The company has denied these allegations. Tether’s crypto token has a circulating supply of 1.8 billion, the company states that every unit of USDT is backed by $1.00 stored in a company-owned bank account.
According to Mike Novogratz, Tether’s ability to redeem more than $1 billion worth of USDT when the cryptocurrency fell below $1.00 in October is a strong indication that the token is fully-backed by USD. The University of Queensland Business School further argued that Tether had no impact on the bitcoin price, however, the currency is currently under heavy scrutiny, which will help to figure everything out.