DOJ Is Investigating Bitcoin Price Manipulation

The U.S. Department of Justice has opened an investigation into cryptocurrency price manipulation on crypto exchanges.

The DOJ is conducting its investigation in conjunction with the Commodity Futures Trading Commission, a regulatory body that, among other things, licensed Bitcoin futures contracts at exchanges Cboe and CME. As crypto markets grow in mind and market share, there is increasing concern that they are populated with bad actors bent on manipulation and malfeasance.

According to internet DOJ sources, this particular investigation concerns manipulation of Bitcoin and Ether.

Investigators are not concerned with crypto exchanges themselves, but with traders who may be taking advantage of the unregulated crypto environment to cheat the system.

Specifically, the investigation is focused on spoofing and wash trading, which are methods for manipulating market sentiment toward a particular outcome.

Spoofing involves a trader submitting a deluge of orders for a cryptocurrency but then canceling the order when markets respond to the trader's interest.

Wash trades occur when an investor trades with himself to produce a mirage of high market demand.

Last January, Citigroup paid a $25 million fee because five traders in their organization spoofed Treasury futures.

"There's very little monitoring of manipulative trading, spoofing and wash tradingIt would be easy to spoof this market."

For many, the idea of oversight shirks the original intention of digital currencies, but there is a growing consensus that some systems will be necessary to guarantee that markets are trading authentically.