Bloomberg quoted unnamed sources in reporting the Department of Justice, which opened a broad criminal probe into cryptocurrencies months ago, is now focusing on what it called a “tangled web” involving bitcoin, tether and Bitfinex.
If this sounds familiar to you, it should. Back in June an in-depth analysis of trades on and other trading platforms by a University of Texas professor suggested just such a relationship.
The research found Bitfinex may have generated artificial demand for bitcoin by using tether to buy it. The researchers found that when the amount of tether in the market increased, bitcoin and some other cryptocurrency prices rose. (Another study conducted in May and released in September found no such relationship.)
Bitfinex has the same management team as Tether, the Hong Kong company that created the cryptocurrency, and there is frequent overlap between the two. For instance, when Tether burned a large amount of its stablecoin last month, it was a Bitfinex official who denied to CoinDesk the intention was to scale back supply at a time the currency had lost its 1-for-1 dollar peg.
Bloomberg said Bitfinex’ general counsel, as well as outside lawyers for the exchange and Tether, didn’t respond to phone calls and emails seeking comment.