The United States’ Justice Department has begun a criminal investigation into a suspected market manipulation of prices for major cryptocurrencies such as Bitcoin and Ethereum by illicit traders.
In some breaking news for Thursday afternoon, Bloomberg is reporting that the United States Department of Justice (DOJ) and the major US markets regulator known as the Commodities and Futures Trading Commission (CFTC) are to work together on an investigation into suspected illegal trading activities in cryptocurrency markets.
The investigation is reported to be in its early stages, but prosecutors will reportedly looking specifically into several major cryptocurrency trading markets including those of Bitcoin and Ethereum.
“Spoofing” & “Wash Trading”
The investigation will focus specifically on a practice known as “Spoofing”, which is a form of market manipulation where illicit traders flood the market with false orders in a bid to deceive genuine traders into buying or selling cryptocurrency.
Another practice is known as “Wash Trading” which involves illicit traders selling and buying amongst themselves to create an impression of heightened market activity, therefore raising confidence among genuine investors, and luring them into their manipulated market.
Winklevoss Twins To Help NASDAQ
This news of this investigation is somewhat timely, and come soon after the Winklevoss twins were awarded the contract to work with Nasdaq via their hugely popular Gemini cryptocurrency exchange platform. The main objective of the brothers will be to monitor NASDAQ markets for unusual trading patterns.
Unfortunately, news of this government probe comes when the crypto market is in the middle of a mini-crisis that has seen more than $50 billion wiped off the combined crypto market value within a matter of days, with Bitcoin itself briefly dipping to a low of $7,260.