US Prosecutors Open Criminal Investigation Into Cryptocurrency Price Manipulation

On the 24th May, Bloomberg reported that a criminal probe into Bitcoin price manipulation by crypto traders, otherwise called spoofing, has been opened by the US department of justice (DoJ).

Spoofing is when traders create an illusion of pessimism in the market by putting huge purchase/offer orders without the aim of filling them. They frequently match this with “wash offers and purchases,” or purchasing and offering their own orders for almost no profit or loss. Further, this generally matches with expansive orders set deliberately above and below the market price to control the price range.

Bloomberg refers to four anonymous sources close to the issue as revealing that the criminal investigation which was ran by U.S. government prosecutors and the Commodity Futures Trading Commission (CFTC) will also investigate how traders could have designed prices by unlawful activities like spoofing and wash trading.

Spoofing, the act of making a lot of requests and then cancelling them had come up before in the crypto markets, when an unknown trader or group of traders known as “Spoofy” purportedly made a purchase order worth $1 mln but failed to follow through with it. Wash trading, which is similar to the work of “Spoofy”, is when traders purchase their own orders thereby creating the illusion of market request to pull in more purchasers.

Bloomberg’s sources take note of that the investigation particularly includes both Bitcoin and Ethereum (ETH).

Both the Justice Department and the CFTC had not reacted to Cointelegraph’s requests for comment by press time.

The U.S. Securities and Exchange Commission (SEC) had launched its own examination concerning cryptocurrencies back in March, with various crypto-related organizations like tZero, a backup of the BTC-friendly, falling under the scope of its probe.

Recently, U.S. and Canadian regulators declared “Operation Crypto Sweep,” a joint effort to find fake cryptocurrency investment plans.


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