DOJ Investigating Bitcoin Trading

U.S. Launches Criminal Probe into Bitcoin Price Manipulation

What's the story?

  • The DOJ has opened an investigation into Bitcoin trading manipulation
  • The creation of a Bitcoin futures market means that manipulating the spot market (spot markets are the underlying markets) is a criminal offense
  • The investigation is focused on practices such as spoofing or flooding the market with fake orders to trick other traders into buying or selling

Why Does This Matter?

Most criminal and civil investigations have focused on ICOs or Ponzi schemes associated with Bitcoin. This is the first criminal investigation focused on Bitcoin trading itself. It's unclear who is targeted in this probe. I'd assume the most likely targets are people trading futures and the spot market. These targets are low hanging fruits for prosecutors as there will be more trading information to support collusion claims. My opinion is pure speculation. Exchanges could also be a likely focus of the investigation. Many institutional investors should view this as a positive move and give them another reason to enter the market. If these investors believe the markets will be policied appropriately, then it will garner confidence in the markets. 


One of the Biggest Crypto Exchanges Is Heading to the Caribbean

What's the story?

  • Bitfinex has secured a banking relationship with Noble Bank in Puerto Rico
  • Noble Bank took over last year after Wells-Fargo severed the relationship
  • Bitfinex is the company behind Tether, which many have accused of manipulating BTC prices

Why Does This Matter?

I would venture that the story above is not related to Bitfinex even though the connection makes sense. While many people have accused Bitfinex of impropriety, there is still no hard evidence, and because Bitfinex isn't US-based, the investigation might be focused on bad actors that the DOJ has clear jurisdiction over. Back to Noble Bank. Noble Bank doesn't have to report certain off-shore assets and thus, I assume, must believe there is less reputation risk for banking Bitfinex. Also, banking cryptocurrency companies is a new niche and while Bitfinex might be shady, it's a massive player in the space. The rise of Silvergate Bank is an excellent example of how cryptocurrency can transform a bank from a community bank to a more well-known bank. Tether was a constant target for cryptocurrency skeptics. Consistently accusing it of being a manipulative vehicle, but the criticism has seemed to die down in recent months. I would speculate that Tether doesn't utilize 1:1 USD backing, but as long as a collapse of the Bitcoin market doesn't occur, Tether will continue to exist.