Bitfinex and Tether Face Second Lawsuit

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Bitfinex and Tether are already wading through a legal battle with the New York Attorney General’s Office over an $850 million USDT loan, and their legal affairs aren’t about to get any easier – a separate class action lawsuit has been filed against them in the United States District Court, South District of New York accusing them of fraud and market manipulation among other offences. The offences relate to alleged manipulation of the crypto markets in 2017 and 2018, during which time the companies supposedly acted to “manipulate the cryptocurrency market with unprecedented effectiveness.”

$1.5 Trillion Liability, Claims Lawsuit

Tether and Bitfinex’s role in the rampant rise of crypto during 2017, and in particular the price of Bitcoin, has always been suspect, in particular after a report from the Department of Finance at the University of Texas, Austin in June 2018 found that “purchases with Tether are timed following market downturns and result in sizable increases in Bitcoin prices.” The lawsuit alleges that this manipulation constituted “a sophisticated scheme” that it utilized to “defraud investors, manipulate markets, and conceal illicit proceeds”. In 2017 and 2018, Tether printed $2.8 billion USDT which “artificially inflated demand for cryptocurrencies and caused prices to spike”, a situation that the lawsuit says wrought an “unprecedented” amount of harm by the defendants. The financial liability the suit places at the door of Tether and Bitfinex is an astonishing $1.5 trillion.

Bitfinex Puts on Its Armor Ahead of Battle

News of the suit will not have come as a surprise to Bitfinex/Tether, who warned on Saturday that some “baseless accusations” were about to be made regarding their conduct using “flawed assumptions, incomplete and cherry-picked data, and faulty methodology”:

We fully expect mercenary lawyers to use this deeply flawed paper to solicit plaintiffs for an opportunistic lawsuit, which may have been the true motive of the paper all along. In fact, we would not be surprised if just such a lawsuit will be filed imminently.

Anticipating a lawsuit shows that the pair are “fully aware of the incredible harm they’ve inflicted on the cryptocurrency market” according to the lawsuit, which was filed the day after the Bitfinex/Tether statement, in which they sought to absolve themselves of the criticism:

Bitfinex and its affiliates have never used Tether tokens or issuances to manipulate the cryptocurrency market or token pricing.

If there’s any group of people who will be happy at this turn of events it is likely to be Bitfinex and Tether’s lawyers, who potentially have another year’s worth of work through the exchange’s alleged malpractice.