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.

India’s Finance Minister Says Countries Are 'Rushing' Into Cryptocurrency

  • India's Finance Minister and Reserve Bank Governor cautioned against countries rushing into digital currencies. 
  • IMF Director Kristalina Georgieva said the organization is taking a "balance approach" to regulation.

Reserve Bank of India Governor Shaktikanta Das and Minister of Finance Nirmala Sitharaman cautioned that countries are rushing into cryptoassets, in the wake of Facebook’s handling of libra. 

Das spoke on cryptoassets earlier in the week at the annual meeting for the International Monetary Fund and World Bank. Sitharaman told Indian reporters of the meeting, 

On our side, the Reserve Bank Governor spoke about it during our turn to intervene. I got the sense that many countries were cautioning on rushing into this.

Das continued, explaining how some officials took issue with libra being labeled a ‘stablecoin,’

Some of them [countries] of course even suggested that they shouldn't be using, all of us shouldn't be using the name stable currency because that's the expression they used. Many cautioned to the extent saying even the name should not be stable currency, it should relate to virtual currency or something of the kind.

Sitharaman said the general consensus was that countries need to show “extreme” caution in the handling of digital currencies. However, she also admitted there were discussions about the benefits of digital currencies, saying that "presentations were also highlighting the strenghts of such virtual currency."

IMF Managing Director Kristalina Georgieva said the organization is taking a “very balanced approach” to crypto-assets while being “mindful” of the risks they pose for consumers. 

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