The US Department of Justice is reportedly launching an investigation to find out if cryptocurrency traders are manipulating the price of cryptocurrencies. The authority will focus its investigation especially on spoofing and wash trading.
Bloomberg reported that this initiative is the highest action taken by the US into scrutinizing the cryptocurrency market. According to the report, the Department of Justice has found four people who have information on the market manipulation.
The people familiar with the situation have stated that the investigation is still in the early stages, but its primary focus is on illegal financial practices that can change the value of the assets. Among the illegal activities, the unnamed source disclosed that the authorities are looking into tricks like fake orders and wash tradings that can create fake trading volumes.
“There’s very little monitoring of manipulative trading, spoofing and wash trading. It would be easy to spoof this market,” said John Griffin, a finance professor at the University of Texas.
The US authorities have started working with the financial regulator CFTC. While the CFTC is not directly responsible for creating new laws for the cryptocurrency market, the institution will advise the Department of Justice regarding illicit stock market activities.
Multiple reports and voices from the crypto community are indicating that the price of bitcoin is being manipulated. The speculations started to circulate the internet last winter when bitcoin’s price reached $20,000 and fell to $13,500 in just two days.
Another well-known strategy for manipulation is the pump and dump scheme. Usually, the people are orchestrating large buying orders for underpriced altcoins which drives the inexperienced investors to invest in the pumped coin. After the group reaches its goal, it dumps the currency and makes a profit on the back of the unaware users.
The regulators form the SEC are still trying to find a way in which they can monitor and stop such schemes. But since all these activities are happening online, they have yet to find a way to stop them.