Game Over For Tether? U.S. DoJ Launches Criminal Investigation

The U.S. Department of Justice initiated a criminal investigation to determine whether the take-off of bitcoin at the end of last year was caused by manipulations related to the stablecoin issued by Tether.

Though a few months ago, government prosecutors opened a large-scale investigation into the cryptocurrency industry, yet they are now focused on a confusing scheme involving bitcoin, Tether, and the associated Bitfinex exchange, Bloomberg reports referencing three sources familiar with the matter.

Previously, various representatives of the cryptocurrency industry assumed that Tether played a significant role in the last year’s rise of bitcoin. At the same time, Tether and Bitfinex have already caught the attention of American regulators. So, at the beginning of the year it was reported that both companies received subpoenas from the Commodity Futures Trading Commission (CFTC). According to sources, the CFTC and the Ministry of Justice are coordinating their efforts in the ongoing investigation.

Representatives of Bitfinex and Tether have not responded to a request from Bloomberg, the press service of U.S. Ministry of Justice has also refused to comment on the situation.

At present, it remains unknown whether the authorities are interested only in the activity that took place on Bitfinex, or it’s certain employees of the exchange that has drawn their attention. Neither the Ministry of Justice nor the CFTC has ever charged anyone and may not find any violations of the law at all, Bloomberg notes.

The CFTC has previously studied various trading strategies in the context of the cryptocurrency market behavior, including the so-called ‘spoofing’, that is, the practice of launching a large number of fake orders on the market to mislead other traders. Now the Ministry of Justice also wants to understand the nature of demand in the cryptocurrency market, sources said. Among other things, representatives of the department are interested in how Tether Ltd. releases the new USDT and why most of them go through Bitfinex exchange.

Recently the crypto market has been suffering from the bear trend with bitcoin significantly losing its value and rolling back to the October 2017 rates. However, in the recent hours, the price of the first crypto was about to start recovering from $4,500 position and since 14:30(GMT) till 16:00 (GMT) has gained almost $300.

Tether's anony­mous op­po­nent, a well-known critic of Tether and Bitfinex reg­is­tered on Twit­ter under the nick­name “Bitfinex'ed” understood that positive trend in his own way, connecting another injection of Tether to the market with the increase in the price of bitcoin.

In June, the re­searchers from the Uni­ver­sity of Texas in Austin con­ducted a study demon­strat­ing that Tether is used to sup­port bit­coin. A sta­ble re­la­tion­ship be­tween the in­crease in Tether's sup­ply (USD₮) and the rise in the price of bit­coin made sci­en­tists run a com­par­a­tive analy­sis of bit­coin and Tether blockchains. It re­vealed that the en­ti­ties as­so­ci­ated with Bitfinex ex­change used USDT to buy bit­coin dur­ing the pe­ri­ods of de­pre­ci­a­tion. Such price-sup­port­ing ac­tiv­i­ties have worked, as the price of bit­coin grew after these in­ter­ven­tions.

The crypto community is constantly calling for Tether’s audit. In June the com­pany has fi­nally pre­sented an audit re­port aimed to prove their bank ac­counts are ca­pa­ble to back USD₮. How­ever, the re­port has been com­piled by Freeh Sporkin & Sul­li­van, LLP (FSS), a law firm, not an au­di­tor, so it can not be con­sid­ered a full-fledged doc­u­ment.