The Commodities, Futures and Trading Commission is working with the US Justice Department to uncover suspected fraud and price manipulation in the cryptocurrency market. The department maintains jurisdiction over any trades executed within the United States. It’s for this reason that many exchanges outside of America don’t take US customers.

Also worth noting is that the SEC, while currently investigating the validity and legality of initial coin offerings, will not be participating in the price manipulation investigation. Co-Director of the SEC’s Enforcement Division Stephanie Avakian is currently working on dozens of cases around whether to further regulate the cryptocurrency industry continues.

Many Ways To Skin A Cat

Price manipulation is a common practice in financial markets. Generally speaking, the Justice Department is looking at suspicious or spam trades that push the market up or down in an attempt to manipulate innocent investors into buying or selling.

Logging onto a trading platform and executing a large volume of transactions is only one way to control the market, however. The crypto world is no stranger to insider trading. Late last year Coinbase, one of the world’s largest crypto marketplaces, launched an internal investigation when rumors spread that insiders at the company had purchased Bitcoin Cash conveniently before Coinbase added it to its platform.

The price of the coin sat at $8,500 on the company’s GDAX platform while all other competitors had it listed for 300% less or $3500. This massive discrepancy in prices prompted the investigation. It is alleged that Coinbase employees with knowledge of the Bitcoin Cash development had purchased BCH coins at a low price only to resell them hours later on GDAX.

Others Cashing In

It’s not just trading platforms and whales that are cashing in on shady trading schemes; influencers do it too. McAfee Antivirus president and founder John McAfee charges a $100,000 publicity fee to cryptocurrency projects looking to be featured on his Twitter account and ultimately gain mainstream exposure.

YouTube influencer Michael Suppo, who tells his audience he doesn’t accept money for promoting projects, was caught doing just that by another YouTube creator. Suppo has hundreds of thousands of followers online and continues to promote projects without disclosing whether or not he’s being paid to do so.

While having social influencers engage in paid promotions isn’t illegal, it does fuel price manipulation in the market. Not all projects with large promotional budgets are as fundamentally sound and worth investing in as paid influencers proclaim them to be. Rather, they are merely an opportunity for those that follow trending news to try and quickly invest for a handsome profit. Granted, that’s not illegal either.

Ultimately, however, where there is smoke, there is fire. The US Justice Department, CFTC, and SEC certainly have ample reason to investigate.

With so much controversy swirling within the industry, it’s no wonder that crypto prices have dropped significantly over the last few weeks. 

Jack Choros is a freelance writer with Blockchain Business News Network