The U.S. Department of Justice is now investigating whether Bitcoin’s drop is somewhat connected with its supposed ties to the stablecoin Tether.
According to a November 20 report by Bloomberg, the justice department launched a comprehensive probe earlier this year after rumors began circulating that Bitcoin’s price boom in 2017 was a result of manipulation. John Griffin, a finance professor at the University of Texas, subsequently released a report stating that every time Bitcoin would experience a drop in 2017, albeit, by a small amount, Tether was always used in buying new BTC, which linked it to a stable currency and subsequently providing it with a price push.
Fast forward to the present and what used to be a comprehensive probe has now become more focused as department representatives try to sift through the web of lies and mystery which may involve the crypto exchange Bitfinex. The DOJ alleges that Bitfinex might be in the center of it all, claiming that the exchange may have been used to illegally move prices. The allegation is based on information from three different individuals, who according to them are “familiar with the matter.”
One of the biggest factors that have contributed to the allegation against Tether is the fact that it is backed by the same management team behind Bitfinex. When new coins emerge, they normally appear first on the exchange. Now, rumor has it that new Tether coins are used in purchasing Bitcoin in huge volumes to propel its price forward.
JL van der Velde, the CEO for both Tether and Bitfinex, has repeatedly belied the accusations and disproved the justice department’s findings, stressing:
“Tether issuances cannot be used to prop up the price of bitcoin or any other coin/token on Bitfinex.”
The U.S. Commodity Futures Trading Commission (CFTC) has slapped both Bitfinex and Tether Ltd. with subpoenas in the latter part of 2017. However, both the DOJ and the CFTC have yet to accuse both projects of any illegal activities and that the probe remains limited on gathering information.
The DOJ is specifically scrutinizing the manner in which Tether issues new coins, and whether the currency is indeed backed by the US dollar, based on its claims. Authorities are also trying to find out if “spoofing,” an illicit practice of flooding the market with bogus orders to push investors to buy, has been employed to boost the Bitcoin market in 2017.