The US Department of Justice has begun an investigation in order to identify the possibilities for manipulation of crypto rates by investors' traders. Information is Bloomberg.
The investigation is conducted jointly with the Commodity Futures Trading Commission (CFTC). The aim is to prove the illegal practices that can be used to manipulate the crypto markets.
One of the areas of the investigation is the so-called spiffing on the exchanges. This technique is often used in traditional financial markets. Spiffing is called a large number of requests for purchases/sales of assets without any intention to enter into transactions. Shortly before execution, requests are canceled.
The purpose of this action is to gather information on demand and supply on the market, to attract the attention of the involved artificially creating a favorable impression of commercial activity, growth in demand and price movements of the asset.
According to the participants in the investigation, spiffing may have had a significant impact on the crypto market, including the Bitcoin of Ethereum.
The US authorities are concerned about the manipulations of the digital asset market. They are not confident about the stock exchanges struggling with fraudsters using illegal practices on the crypto market.
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The US DOJ investigation is focused on the price manipulation of primarily BTC and ETH. Specifically looking for instances of price manipulation by spoofing (placing false orders) and wash trading (participants trade with themselves). The more they can identify and root out the suspects involved in these practices the better it will be for the larger law-abiding population in the crypto space.
Very little information is available on the extent of the investigation, mainly what exchanges are they looking at. If they are only looking at US exchanges, then the impact may be limited. Second can they achieve anything? Traditional are also allegedly manipulated to a large degree, specially ones that are relatively less liquid or are OTC. So i wonder how much can they achieve.
The good thing is that this may cause other legal authorities in other jurisdictions to also investigate and may be it reduces the extent of manipulation. I think exchanges based in tax havens should be targetted the most since those jurisdictions are incentivised little to investigate as their primary benefit is presence of an exchange on their land to create employment etc and lead to indirect tax revenue.
Its a good thing nonetheless. Lets wait and see.