Tether and Bitcoin: The Justice Department’s Crypto Scrutiny Deepens

Unraveling the Crypto Mystery

The U.S. Department of Justice (DoJ) has taken a magnifying glass to the turbulent waters of the crypto market, with a particular focus on whether Tether (USDT) played a role in artificially inflating Bitcoin (BTC) prices during last year’s epic rally. As the intrigue unfolds, Bloomberg reveals insights from three sources ‘in the know’ who claim that the DoJ is zooming in on the dynamic duo of Bitcoin and Tether, alongside their partner-in-crime, the crypto exchange Bitfinex, helmed by the same CEO, Jan Ludovicus van der Velde.

The Token Tango: Tether and Bitcoin

As Tether issues new tokens, the spotlight is on whether these tokens are entering the market through Bitfinex as a part of a broader scheme to employ some ‘market tricks’ to boost crypto prices. Picture it as a secretive dance, where each step could lead to a misstep and expose the potential for market manipulation. The question looms: is this tango of Tether and Bitcoin truly innocent or is it a calculated performance?

The Regulators Step In

In a twist reminiscent of a high-stakes thriller, back in May, the DoJ and the U.S. Commodity Futures Trading Commission (CFTC) launched a separate criminal investigation into possible price manipulation involving Bitcoin and Ethereum (ETH). However, as of now, the investigation raises more questions than answers. Is Bitfinex the key player in this drama, or is it simply a background character in a far more convoluted story? The DoJ remains tight-lipped, refusing to comment on these developments.

The Cloud of Suspicion

Bitfinex isn’t new to controversy; it has previously faced inquiries from U.S. regulators, particularly after it and Tether received subpoenas for unspecified matters in December 2017. The controversy primarily stems from ongoing skepticism surrounding Tether’s claims of being fully backed by U.S. dollars. Critics have even gone as far as to suggest that Tether and Bitfinex are in cahoots to cover up a significant fiat reserve deficit. Drama alert!

Academic Insights and Market Moves

Further complicating matters, an academic paper co-authored by University of Texas professor John M. Griffin asserts that Tether’s purchasing patterns seem almost strategic, with precise timing aligned with market downturns leading to significant BTC price surges. While Griffin has abstained from commenting amidst all the buzz, it’s reported that he has briefed the CFTC about his findings, which adds another layer to this complex onion of crypto intrigue.

The Bottom Line: Market Manipulation or Just Bad Luck?

This fall has brought its share of whispers regarding Bitfinex’s potential insolvency, which the exchange vehemently denies. In an eyebrow-raising move, Tether recently redeemed and destroyed a whopping $500 million worth of USDT, stirring fears and allegations of market manipulation. Some speculate this act was an opportunistic maneuver to cash in on a market rebound while redeeming at a low cost—a classic case of buy low, sell high… or is it the murky realm of play dirty?