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Feds Open Probe Into Bitcoin Price Manipulation: Report

By Richard Adhikari
May 25, 2018 7:00 AM PT
the doj reportedly has opened a criminal investigation into manipulation of bitcoin and other cryptocurrency markets

The United States Department of Justice and the Commodity Futures Trading Commission have opened a joint criminal investigation into price manipulation of bitcoin and other cryptocurrencies, according to a Bloomberg report.

The illicit tactics reportedly being investigated include spoofing and wash trading.

Bitcoin's share prices have been fluctuating wildly over the past year, ranging from US$1,800 to almost $20,000, leading to rumors of price manipulation.

News of the joint DoJ-CFTC probe pushed bitcoin's share prices to a six-week low. The cryptocurrency's price stood at $7,545 at mid-day Thursday.

The probe "will help the market," said Darryll DiPietro, CEO of Concierge Club.

"Once everyone gets put under a microscope, it will be difficult for some of those sh*tty companies launching dicey IPOs," he told the E-Commerce Times. "I'm not for regulation per se -- I believe in a decentralized market -- but I'm for controlling those sh*tty companies. Legitimate projects will benefit from this."

Both DoJ spokesperson Nicole Navas Oxman and CFTC spokesperson Donna Faulk-White declined to comment for this story.

Market Manipulation Murmurs

Back in 2017, Hackernoon ran a story alleging A single entity dubbed "Spoofy" was responsible for dominating the price of bitcoin, according to a story Hackernoon ran last year.

Spoofy was spoofing and engaging in wash trading, according to the report, and had come up with a scheme it named "Tether."

That article sparked considerable comment.

An academic paper on price manipulation in the bitcoin system back in 2013, which focused on the Mt. Gox exchange in Japan, drew media attention earlier this year. .

The CFTC earlier this month issued guidance for listing virtual currency derivative products. Also, two CFTC officials mentioned the possibility of regulating cryptocurrencies, suggesting cooperation between the CFTC and the SEC.

The CFTC has issued an advisory warning of virtual currency pump-and-dump schemes.

"We're facing a speculative bubble in which the market hasn't firmly determined the balance of all the upside and the risk associated with cryptocurrencies," noted Andreas Scherer, managing partner at Salto Partners.

Cryptocurrencies are "still a relatively small fraction of the global financial transaction volume," he told the E-Commerce Times, and trading platforms have not yet implemented all the common safeguards in place at established stock exchanges. "So, known manipulation strategies such as spoofing occur unmitigated."

Cryptocurrency Scams

Twitter, Google and Facebook have banned cryptocurrency ads due to the high level of scams in the field.

Of nearly 1,500 cryptocurrency offerings examined, 271 -- or about 20 percent -- were dubious, a Wall Street Journal investigation found. Among the suspicious findings were missing or fake executive teams, the use of plagiarized investor documents, and promises of guaranteed returns.

Banks generally have downplayed bitcoin, and JP Morgan Chase CEO Jamie Dimon last year took several shots at the currency, whose share prices fell each time he launched an attack.

Several countries, including China, have banned bitcoin.

"The governments and major banks are trying to manipulate the market," DiPietro remarked.

The banks likely will be targeted by the DoJ because "its big score will be taking down one of these big companies," he said, adding that Facebook reportedly has been working on its own cryptocurrency, and thus has an ulterior motive.


Richard Adhikari has been an ECT News Network reporter since 2008. His areas of focus include cybersecurity, mobile technologies, CRM, databases, software development, mainframe and mid-range computing, and application development. He has written and edited for numerous publications, including Information Week and Computerworld. He is the author of two books on client/server technology. Email Richard.


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