You've also got 'churning, ' where a trader puts in many buy and sell orders for the sole reason of attracting further investors due to the flurry of activity and increasing value; and similarly, 'wash trading, ' which is the act of doubling down on securities to increase prices off the back of false activity.
A Justice Department spokesman and CFTC officials are yet to respond or comment.
The crypto market is mostly unregulated, making price manipulation a possibility.
Unlike in Japan, where virtual currency exchanges are subject the same rules and oversight as any other financial institutions and are required to register with the government, in the US and other countries, cryptocurrency exchanges are still largely unregulated, opening up the doors to fraud and manipulation. Its popularity rocketed in 2017, with bitcoin's price increasing from $960 in January to a peak of nearly $20,000 in December, reports the Times.
"There's very little monitoring of manipulative trading, spoofing and wash trading". The investigation centers around a few illegal trading practices - namely order spoofing and wash trading.
According to his work, Spoofy was a trader or group of traders that often placed orders of $1 million or more, without actually executing them.
The department has ordered for a thorough scrutinization of exchanges and traders, in a bid to find the origin of fraudulent market activities, such as "spoofing", fake market orders, and other types of manipulation.
Now, with the involvement of regulators in the cryptocurrency market, we might soon see the end of ongoing severe price dump.
This isn't the first time USA authorities have taken notice of cryptocurrency market manipulation.
"Weeding out the bad actors is a good thing, not a bad thing for the health of the market", Novogratz, who is setting up cryptocurrency merchant bank Galaxy Digital, said in a telephone interview.