Breaking: US Criminal Probe to Look Into Potential Bitcoin Price Manipulation

Francisco Memoria
  • The US Department of Justice has recently launched a criminal probe into potential bitcoin price manipulation.
  • The investigation is in its early stages, and is said to be targetting illegal activities like wash trading and spoofing.

The US Department of Justice (DOJ) has reportedly launched a criminal probe into whether traders are actively manipulating the price of various cryptocurrencies, including bitcoin. The probe is said to be after spoofing and wash trading.

According to Bloomberg, the move is a culmination of the US’ scrutiny into cryptocurrency markets, which some claim are rife with misconduct. Bloomberg’s report cites four people familiar with the matter.

The investigation, according to the unnamed sources, is still in its early stages and is focusing on illegal practices that can influence prices. These include spoofing the market with fake orders to trick other traders, and wash trading to create fake trading volume.

Federal prosecutors, Bloomberg adds, are working with the Commodity Futures Trading Commission (CFTC), a financial regulator, on the investigation. Notably, the CFTC is a derivatives watchdog that doesn’t regulate markets in which actual cryptocurrencies are traded. Nevertheless, it has the authority to act if it spots fraud.

The limited oversight, University of Texas finance professor John Griffin noted, makes the cryptocurrency ecosystem a target for crooks. He was quoted as saying:

“There’s very little monitoring of manipulative trading, spoofing and wash trading. It would be easy to spoof this market.”

John Griffin

Various cryptocurrency enthusiasts have long believed bitcoin’s price is actively being manipulated. According to CryptoCompare data, the flagship cryptocurrency has fallen from a nearly $20,000 all-time high in mid-December, to about $7,500 at press time.

The cryptocurrency’s bearish period has notably seen it various odd patterns, which some critics claim to be proof of price manipulation. Last year, a blogger known as Bitfinex’ed documented the actions of “Spoofy,” a single entity the blogger claims is dominating bitcoin’s price.

According to his work, Spoofy was a trader or group of traders that often placed orders of $1 million or more, without actually executing them. Its goal was to trick other traders and force the cryptocurrency’s price to go in the direction it wanted it to go.

As for other cryptocurrencies, it’s well-known various groups organize “pump and dump” schemes to manipulate their prices, especially when it comes to small-cap cryptos. As covered, last month a group of cryptocurrency influencers were reported to the FBI and the US Securities and Exchange Commission (SEC) for orchestrating these schemes.

Billionaire Tim Draper: Bitcoin Is 'the Currency of the Future'

  • Tim Draper, a billionaire venture capital investor, has recommend taking a long-term approach to investing in Bitcoin (BTC).
  • The Harvard business school graduate believes Bitcoin is the "currency of the future" and that the value of the USD (and other fiat currencies) will gradually depreciate - as people lose interest and confidence in them.

Billionaire venture capitalist Tim Draper recently made a rare appearance on a Facebook live Q&A session during which he shared his views and insights regarding current traditional financial markets and also offered some suggestions on how to sensibly invest in cryptocurrencies.

Draper, an electrical engineering graduate from Stanford University, is well-known for purchasing 29,656 bitcoins (BTC) in 2014, for $18 million. from the US Marshall Service auctions. Notably, 144,336 bitcoins (in total) had been seized at that time after the US Federal Bureau of Investigation (FBI) took down online black market Silk Road.

Bitcoin Will Create "Much More Fluid Markets"

In his recently conducted Facebook live session, the legendary investor and business tycoon seemed to express more confidence in Bitcoin’s long-term performance than on the world’s most dominant currency, the USD. He remarked:

What it is (Bitcoin) is the future of currency and the currency is going to [remain] decentralized and open and you’re going to end up with a much more fluid, dynamic currency if you own Bitcoin, than if you own [US] dollars.

In mid-September 2018, Draper compared the growth and adoption of the internet to that of the current development of cryptocurrencies and blockchain technology. The Harvard business school graduate argued at the time that the combined market capitalization of the digital asset market would surge to around $80 trillion within the next 15 years.

Bitcoin Will Surge To $250,000 By 2022

This, as fiat currencies would gradually begin to lose their value and become practically worthless, Draper forecasted. Moreover, Draper believes bitcoin's price will skyrocket to $250,000 by 2022. In his most recent comments regarding Bitcoin’s potential, Draper noted that: “I never make bitcoin predictions in the short term because short term anything can happen.”

He added:

It (Bitcoin) will move up and down and if you’re investing in the short term you’re making a mistake. People can manipulate the price, it moves up, moves down depending on big customers coming in to buy or big owners coming in to sell.

Psychology of Investing

Going on to describe the psychology of the investing process, Draper remarked:

Sometimes Bitcoin is going to feel very valuable … and sometimes you’re going to feel like dollars are what you really want to hold on to. When you feel like dollars are what you really want to hold on to, you probably want to buy Bitcoin.

Draper, who’s notably the founder of Draper Associates, a Menlo Park, California-based, seed-stage VC firm founded in 1985, further explained that having a long-term investment strategy and approach towards Bitcoin could potentially yield a significant return-on-investment (ROI).