The US Department of Justice (DoJ) has started an investigation into whether last year’s cryptocurrency rally by manipulation involving the controversial stablecoin Tether (USDT), Bloomberg has reported, citing three unnamed sources familiar with the matter.
According to a report from the newswire, published on Tuesday, the DoJ is investigating whether Bitcoin’s meteoric rise last year was solely the result of demand from investors, or it was supported by market tricks and manipulation.
Tether, which is used as something of a proxy for the US dollar on many crypto exchanges, is supposed to be fully backed by US currency. However, many observers and traders have questioned the validity of these claims. On top of that, some have speculated that Tether has been issuing new, uncollateralised USDT tokens to prop up the Bitcoin price in times of weakness. The latest such accusation came from Twitter user Bitfinex’ed, who implied that yesterday’s decline in the Bitcoin price had been stopped by the a $50-million Tether injection into the markets.
“Within minutes of Tether re-injecting $50 million dollars worth of Tethers, the market magically turns around. It's just a coincidence. I'm sure everything is fine,” wrote Bitfinex’ed, who is a big critic of Tether and crypto exchange Bitfinex. Both companies share the same management team. In addition, when new USDT tokens come to market, they’re mostly released on Bitfinex, Bloomberg notes. This is among the issues that are being examined by the Justice Department.
The two companies reportedly received subpoenas from the Commodity Futures Trading Commission (CFTC) last year. According to Bloomberg’s sources, the DoJ and the CFTC are now coordinating their investigations. The report notes that the authorities have not accused anyone of wrongdoing and may ultimately conclude that nothing illicit occurred.
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