On May 24th, the United States Department of Justice in collaboration with the United States Commodity Futures Trading Commission (CFTC) launched a criminal investigation into potential price manipulation across the cryptocurrency market, particularly with bitcoin.
That investigation is heating up, with the CFTC reportedly issuing subpoenas to four popular cryptocurrency exchanges, demanding extensive trading data to determine whether or not any manipulation has occurred.
The CFTC is seeking data from Bitstamp, itBit, Kraken, and Coinbase. Together, the four exchanges serve as the base price for the bitcoin futures listed by CME Group. Bitcoin futures are regulated by the CFTC, and any manipulation in those markets could affect how futures contracts settle.
According to sources familiar with the matter, the CFTC issued the subpoenas because they were upset CME Group had not been successful in gathering the data from the exchanges amicably. The exchanges initially denied the request for being “intrusive.”
In the end, exchanges did offer some data, but only after CME Group scaled back the amount of data they were requesting from a full day of trading data to merely a few hours of activity. The CFTC’s subpoena will force these exchanges to fully comply.
The investigation circles around January trading data, when CME Group’s first bitcoin futures contracts were settled. The CFTC is investigating reports of “wash-trading”– a practice where traders trade with oneself to suggest there is more demand or buying and selling pressure in the market than there actually is - and “spoofing” – an illegal strategy where wealthy investors place large orders for an asset that never execute to steer price in a particular direction, only to pull the order later.