US Regulator Looks Into Four Crypto Exchanges in Price Manipulation Probe - Report

The CFTC has issued subpoenas to Coinbase, Kraken, itBit, and Bitstamp

Regulators from the US Commodity Futures Trading Commission (CFTC) have requested comprehensive trading data from four cryptocurrency exchanges as part of an ongoing investigation over potential Bitcoin (BTC) price manipulation, the Wall Street Journal reported on Friday, citing people familiar with the matter.

The inquiry has been triggered by the release of BTC futures by CME Group in December 2017. CME forms its Bitcoin futures prices based on data from four crypto exchanges — Bitstamp, Coinbase, itBit and Kraken — where manipulative trading could have distorted the value of the futures.

After the settlement of the first BTC futures contract in January, CME requested that the four exchanges provide trading data, such as time of trades, unfiled or canceled orders, order sizes, and trader identities. According to the WSJ, CME originally sought the information through a London-based company that calculates the Bitcoin price to use for its futures contracts.

However, the exchanges have responded negatively to the request, citing privacy and security concerns. The exchanges ultimately provided some data, but only after CME limited its request to a few hours of activity, instead of a full day, and restricted to a few market participants, the sources revealed.

This dispute has reportedly raised concerns with the CFTC and the regulator opened an investigation looking for possible cryptocurrency trading schemes. The probe aims to identify manipulative practices such as spoofing, which is the creation of fake buy or sell orders to make the illusion of real supply and demand.

Kraken CEO Jesse Powell said the CFTC’s “newly declared oversight” of the prices “has the spot exchanges questioning the value and cost of their index participation.” He noted, as quoted by the WSJ: “If there is any kind of attempted manipulation, whoever is doing it is taking a huge amount of risk for very little possible upside.”

Charles Cascarilla, CEO of Paxos, the company running itBit, said there is a clear desire for stricter oversight. Bitstamp and Coinbase have not yet commented on the news.

The CFTC is understood to be coordinating its investigation with the US Department of Justice (DOJ). Last month, Bloomberg reported that the two regulators opened a similar but separate investigation into BTC and Ethereum (ETH) price manipulation.

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