A long-standing class-action lawsuit claims that Tether and Bitfinex conspired to manipulate cryptocurrency market prices. According to an amended complaint filed in the Southern District of New York, the plaintiffs accuse the companies of using a deceptive scheme involving Tether’s dollar-backed stablecoin, USDT, to manipulate crypto prices.
Manipulation of Crypto Prices
The plaintiffs allege that Tether and Bitfinex “executed a sophisticated scheme to fraudulently inflate the price” of cryptocurrencies, including Bitcoin (BTC), through “massive, carefully timed purchases […] to signal to the market that there was enormous demand and thus cause the price of those commodities to spike.”
According to the complaint, these purchases were financed with billions of dollars in USDT, which Tether assured was backed one-to-one by United States dollars. However, the plaintiffs argue that this was not the case, asserting that Tether and Bitfinex violated both the Commodities Exchange Act (CEA) and the Sherman Antitrust Act.
Unbacked USDT Issuance in the Tether Lawsuit
The complaint contends that “Tether issued billions of USDT to itself with no US dollar backing — simply creating the USDT out of thin air.” This alleged deception, according to the plaintiffs, “ultimately result[ed] in billions of dollars of damage to innocent crypto commodity purchasers.” The plaintiffs claim that Tether and Bitfinex’s actions caused substantial harm to the market and individual investors.
This lawsuit, initiated in 2019, has seen multiple delays, including the removal of the plaintiffs’ original legal counsel in 2022. The current complaint is allegedly the third filed in this case. According to the news sources, Tether and Bitfinex have opposed the plaintiffs’ request to amend the complaint in 2023, describing it as a last-ditch effort to revive a failing case. The defendants argued that after two years of fact discovery, including over a million pages of document discovery and numerous depositions, “not a single shred of evidence supporting the market manipulation scheme alleged in the [Complaint]” was found.
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Expert Analysis and Assertions
In the filing of the Tether lawsuit, the plaintiffs assert that “[e]xpert analysis shows that Bitfinex and Tether issued unbacked USDT and used that debased USDT to buy large amounts of crypto commodities.” This allegation supports their claim that the companies manipulated the market by artificially inflating the demand and price of cryptocurrencies, including Bitcoin and Ethereum (ETH). The plaintiffs believe this manipulation was a direct result of Tether and Bitfinex’s actions.
The outcome of this Tether lawsuit could have significant implications for the cryptocurrency market and its regulatory landscape. If the plaintiffs’ allegations are proven true, it would underscore the need for stricter oversight and regulation of stablecoins and cryptocurrency exchanges. Conversely, if the defendants are exonerated, it could reinforce the current operational practices of stablecoin issuers like Tether and exchanges like Bitfinex.
Ongoing Developments
As the case progresses, it continues to attract attention from both legal experts and the cryptocurrency community. The Tether lawsuit highlights the ongoing concerns about transparency and accountability within the crypto market. Both Tether and Bitfinex have maintained their innocence, asserting that their actions were lawful and transparent. They argue that the plaintiffs have failed to provide concrete evidence to support their claims of market manipulation.
Conclusion
The Tether lawsuit is a pivotal case in cryptocurrency, with far-reaching implications for the market and its regulatory environment. The allegations against Tether and Bitfinex underscore the importance of transparency and proper backing of stablecoins like USDT. As the legal proceedings continue, the crypto community closely watches for any developments that might impact the future of digital currencies such as Bitcoin and Ethereum (ETH). This case’s outcome will likely influence how stablecoins and crypto exchanges operate, potentially leading to more stringent regulations to prevent market manipulation and protect investors.
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