US investigators open criminal probe into cryptocurrency price manipulation

The Department of Justice wants to know if traders have been using well-known, highly illegal, stock market tactics to move the price of Bitcoin and other digital currencies.

The US Justice Department has set its investigators to the task of deciding whether cryptocurrency traders are manipulating the price of Bitcoin and other digital currencies, reports Bloomberg – citing “four people familiar with the matter”. Federal prosecutors will be working alongside staff of Commodity Futures Trading Commission (CFTC), the regulator that has taken on role of policing cryptocurrency related derivatives.

The investigation, its report says, is focused on several illegal ways traders can move market prices, one of which is ‘spoofing’ the market with a high number of fake orders to prompt others into buying or selling. Another tactic, so-called ‘Wash’ trading, involves a trader dealing with themselves to create the appearance of demand and draw others in. Both tactics are well-known and highly policed in equities trading.

Bloomberg says: “Authorities worry that virtual currencies are susceptible to fraud for multiple reasons: skepticism that all exchanges are actively pursuing cheaters, wild price swings that could make it easy to push valuations around and a lack of regulations like the ones that govern stocks and other assets.”

As we reported earlier, Cryptocurrency prices have fallen across the board today, a situation apparently exacerbated by the news.

Many parts of the UK cryptocurrency market have been pushing for tighter regulation of the sector over the few months, having coalesced into a trade body – CryptoUK. It believes that wider public interest and institutional confidence in digital currencies can only be justified if it comes with tighter policing and standardised practices for exchanges and firms dealing in them. This echoes the general attitude of the US regulators, which have expressed concern about investment in cryptocurrency and ICOs by the wider public – who, though keen for the profits, may not be as clear about the risks involved.

A Justice Department spokesman declined to comment for Bloomberg, with the CFTC officials also failing to respond.

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