NOIDA (CoinChapter.com) — Chaos reigned in Ethereum circles after news spread that the Etheruem Foundation was under investigation by a ‘state authority.‘
As the news spread, ETH prices plummeted 6.4% within hours. However, it turns out the entire thing was more of a FUD-fueling misinformation rather than an actual legal action against the world’s second-largest crypto.
Here’s What Happened
Coindesk first reported the alleged ‘confidential investigation‘ against the Ethereum Foundation by an unnamed state authority into the Ethereum Foundation. The report cited the Ethereum Foundation’s GitHub repository, which noted some changes to the Foundation’s website.
A freelance Ethereum front-end developer, Pablo Pettinari, removed text that hinted the Foundation was under investigation by some government entity. The text that Pettinari removed was a disclaimer stating that no government agency had contacted the Foundation in a confidential manner.
Pettinari noted that the removal happened since they “received a voluntary inquiry from a state authority that included a requirement for confidentiality.”
A while later, Fortune reported that several US crypto companies had received subpoenas from the Securities and Exchange Commission. The report claimed that the regulatory watchdog had launched a campaign to classify Ethereum’s Ether token as a security.
As expected, news of the Ethereum Foundation being under investigation by a state authority wreaked havoc in the market, with many taking to social media to share their own interpretation of the events. The first thought that came to investors’ minds was likely, “Well, pop goes the ETF.“
Furthermore, finance lawyer Scott Johnsson noted that the move likely involved the upcoming spot ETH ETF approvals. Moreover, a crypto trader by the user name ‘huss‘ speculated that the SEC was likely looking for reasons to reject the spot ETH ETF applications.
Ethereum Foundation Under Investigation Might Be Old News
Adam Cochran, founder of Cinneamhain Ventures and a crypto trader, claimed that the catchy headlines were nothing more than clickbait. Cochran pointed out the Ethereum Foundation was not under any investigation.
Moreover, Cochran also noted the update from Fortune regarding the Ethereum Foundation being under investigation. The trader asserted that the news was just confirmation of Gary Gensler’s campaign against all things crypto.
In addition, the FUD-induced dump of ETH tokens had little to no impact on the token. Although crashing at first, ETH price recovered as buyers entered the market to buy the dip.
The price action suggests a likely price manipulation at work. A rumor of an SEC investigation brings down prices, induces a FUD-fueled sell-off, and then the participants buy the extra supply, absorbing the selling pressure while lining their coffers.
If true, the incident would lend gravitas to the SEC’s argument of cryptos being prone to manipulation.
