US Justice Dept. Investigating Bitcoin/Tether/Bitfinex Connections – Report

FinTech, Investing, News, Regulation | November 25, 2018 By:

The US Justice Department is investigating whether the bitcoin rally that caused prices to reach the $20,000 level was, in part, caused by market manipulation.

Bloomberg News is reporting that federal prosecutors are looking into a potential criminal conspiracy involving bitcoin, Tether, and its exchange Bitfinex, which has a stake in the stable coin pegged to the US dollar.

Bitcoin has experienced a massive drop in price since the beginning of the year, while Tether has gone as low as 0.89 cents recently before rebounding. Observers have questioned claims that Tether has sufficient reserves to back its claim that it can be exchanged 1:1 with US dollars.
Bitfinex has the same management team as Tether Ltd., a Hong Kong-based company that created the coin.
The allegations floating around are that Tether has been used to buy bitcoin when the market value dips. If Tether is legitimate, the exchange is valid. But if it has no reserves, bitcoin is being acquired and artificially inflated by a bogus algorithm.
JL van der Velde, the chief executive officer of Tether Ltd. and Bitfinex, has rejected such claims, Bloomberg reports. However, Bitfinex’s general counsel and other lawyers for the exchange and Tether Ltd. didn’t respond to requests for comment.
Tether Ltd. and Bitfinex both received subpoenas last year from the US Commodity Futures Trading Commission, Bloomberg reported in January. The Justice Department and CFTC are coordinating their examinations.
Just who is being investigated is unclear, since the Tether/Bitfinex operations are so intertwined.  Neither the Justice Department nor the CFTC has accused anyone of wrongdoing and may never do so.

Both the Justice Department and CFTC declined to comment on the Bloomberg report.