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The U.S. Department of Justice is investigating whether the cryptocurrency Tether was used to prop up Bitcoin.
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The U.S. case part of broader review of possible coin manipulation. Tether is considered a relatively stable cryptocurrency with its value supposedly tethered to the U.S. dollar, hence its name.
In just a matter of days, Bitcoin has seen its price crash from around $6400 to near $4000 in just one week.
From Bloomberg News:
While federal prosecutors opened a broad criminal probe into cryptocurrencies months ago, they’ve recently homed in on suspicions that a tangled web involving Bitcoin, Tether and crypto exchange Bitfinex might have been used to illegally move prices, said three people familiar with the matter.
Bitfinex has the same management team as Tether Ltd., a Hong Kong-based company that created the namesake cryptocurrency. When new coins come to market, they’re mostly released on Bitfinex.
Some traders -- as well as academics -- have alleged that these Tethers are used to buy Bitcoin at crucial moments when the value of the more ubiquitous digital token dips. JL van der Velde, the chief executive officer of Tether Ltd. and Bitfinex, has previously rejected such claims.
Bloomberg added:
The probe follows allegations made in a June paper by University of Texas Professor John Griffin and co-author Amin Shams. Griffin and Shams wrote that trading in Tether shows a pattern of underpinning, and manipulating, Bitcoin.
The U.S. Justice Department is also looking into how Tether creates coins and why they predominently enter via Bitfinex.
Neither the Justice Department nor the CFTC has accused anyone of wrongdoing, and authorities may ultimately conclude that nothing illicit occurred, Bloomberg reports.
The cryptocurrency world has also been rattled in recent days by the split of Bitcoin Cash, itself an offshoot of Bitcoin.
Upwards of 70% of online gambling transactions in the U.S. and other restrictive markets are said to be via Bitcoin.
- Aaron Goldstein, Gambling911.com
