Inside Sources: US Justice Department, CFTC Are Coordinating Investigations into Tether, Bitfinex's Operations

  • US Justice Department and the US Commodities Futures Trading Commission (CFTC) are coordinating crypto-related investigations. 
  • Both US authorities are looking more carefully into the alleged crypto market manipulation involving Tether's USDT and digital asset exchange, Bitfinex.

The US Department of Justice (DoJ), a federal executive department law enforcement agency of the American government, has reportedly started looking more carefully into the alleged crypto market manipulation involving Tether Ltd. and digital asset exchange, Bitfinex.

Stablecoin USDT Used To Buy And Sell At Opportune Times

As many digital currency market analysts suspect, traders with inside information might have been responsible for pumping the bitcoin (BTC) price to record-level highs towards the end of 2017.

These traders may have used Tether’s stablecoin, USDT, to buy and sell bitcoin at opportune times based on insider information, thus illegally moving cryptocurrency prices - according to three sources familiar with DoJ’s extensive probe into the various exploitative activities in the digital asset market.

In addition to the DoJ’s investigation, the US Commodities Futures Trading Commission (CFTC) had subpoenaed Tether Ltd. and Bitfinex on December 6th, 2017. According to sources familiar with the matter, the CFTC and the DoJ are now coordinating their investigation of the activities of both firms.

Massive Crackdown Launched In May Of 2018

Moreover, other regulatory authorities such as the North American Securities Administration Association (NASAA), an international body formed to ensure consumer protection, had initiated the largest cryptocurrency crackdown in history (starting in May of 2018).

Notably, NASAA launched 70 separate investigations (toward the end of May) into a number of potentially fraudulent crypto-related investment schemes. At the start of the wide-reaching probe, Joseph Rotunda, the Director of the Enforcement Division at the Texas State Securities Board, had said that the digital asset market is “saturated” with scams.

Rotunda’s investigation team had joined over 40 state and provincial authorities from Canada and the US to launch the massive crackdown on fraudulent activity in the crypto space. While these investigations involved many different types of crypto scams, particularly those associated with initial coin offerings (ICOs), regulators may be focusing their efforts more toward larger market participants such as Tether and Bitfinex.

Buying Bitcoin At Key Moments

JL van der Velde, the CEO of Tether Ltd. and Bitfinex (whose LinkedIn profile notably does not mention that he is the chief executive at Tether), has previously denied being involved in any type of market manipulation.

At present, it is unclear whether authorities are only looking into the potentially exploitative trading activity involving Hong Kong-operated Bitfinex, or if regulators also suspect that the exchange’s senior executives may have been involved in illegal conduct.

As mentioned, some crypto market analysts have alleged that large amounts of USDT are used to purchase bitcoin at key moments (based on insider information), particularly when its price dips, in order to unfairly profit off of arbitrage and market fluctuations.