A law office from New York filed a lawsuit against a cryptocurrency exchange Bitfinex and Tether, claiming they manipulated the crypto market, causing harm to traders while reaping benefits for themselves.
According to the lawsuit, Bitfinex and some of the associated entities participated in fraudulent, competition-distorting, and market-manipulation activities, causing financial damage to the plaintiffs.
Additionally, the plaintiffs stated that the total damages amount to over $1 trillion.
“Calculating damages at this stage is premature, but there is little doubt that the scale of the harm wrought by the Defendants is unprecedented. Their liability to the putative class likely surpasses $1.4 trillion U.S. dollars,” wrote the plaintiffs.
Roche Freedman, a New York-based law firm that filed the class-action suit, blamed Tether and Bitfinex of producing the “largest bubble in history” in a tweet by the law firm’s founding member Kyle Roche.
The lawsuit was filed on Oct. 6 and among many things, it claims that Bitfinex and Tether above all completed a “sophisticated scheme” including “part-fraud, part-pump-and-dump, and part-money laundering.”
As seen in the lawsuit, Roche Freedman stated that Tether lied about supporting the number of its Tether coins (USDT) with the same amount of US dollars. Alternatively, Roche Freedman states that the cryptocurrency company issued outstanding value of unbacked Tether token to exploit the cryptocurrency prices.
“Because the market believed the lie that one USDT equaled one U.S. dollar, Bitfinex and Tether had the power to and did, manipulate the market on an unprecedented scale to profit from boom-and-bust cycles they created,” Roche Freedman wrote in the lawsuit.
The lawyers claim that cryptocurrency owners suffered actual damage of $450 billion, and by tripling that amount they came to the aforementioned $1.4 trillion. Furthermore, Tether can’t even provide sufficient funds to cover for its USDT stablecoin, it is added in the lawsuit.
Both companies preventively denied the accusations and described the Roche Freedman’s action as a “meritless and mercenary lawsuit based on a bogus study.”
As a response regarding the issue, Bitfinex and Tether representative Joe Morgan wrote a statement during the weekend, claiming that both companies anticipated a legal action based on “an unpublished and non-peer reviewed paper falsely positing that Tether issuances are responsible for manipulating the cryptocurrency market.”
This is not the first time that someone is accusing Tether of manipulating the crypto market. In June 2018, researchers at the University of Texas-Austin announced a study which claims that the price of BTC jumped after Bitfinex used USDT (Tether) to buy Bitcoin when prices are dropping.
The U.S. Department of Justice is apparently investigating the charges, however, it’s still too early to say whether the DOJ has come to any conclusions at this point.
In September 2018, one more study was issued by the University of Queensland professor Wang Chun Wei. Professor Wei wrote that while “Tether grants were potentially timed to follow bitcoin downturns,” the actual correlation wasn’t statistically substantial.