Bitfinex and Tether: Class suit filed for manipulation of Bitcoin price

  • A class action lawsuit has been filed against Bitfinex, Tether, Digfinex and current corporate executives.
  • The plaintiffs accuse the Stablecoin printer of manipulating the cryptocurrency market and causing the “biggest bubble in human history”.

As CNF reported yesterday, Tether issued a press release this weekend in which it stated that it expects a “worthless and mercenary” lawsuit over allegations of market manipulation. This assumption has now come true. Yesterday a document was published confirming the complaint.

A class action lawsuit has been filed against Bitfinex, Tether, Digfinex and current corporate executives accusing Stablecoin printer Tether of fraudulently inflating the cryptourrency market by printing uncovered USDT tokens. This had caused “the biggest bubble in human history”. The lawsuit was filed by Roche Freedman LLP on behalf of several investors who feel cheated by Tether.

It is noteworthy that the lawsuit was filed in the United States District Court in the Southern District of New York by lawyers who also successfully represented the Kleiman family against Craig Wright. The class action alleges that the plaintiffs suffered more than $1.4 billion in damages as a result of Tether’s misleading, anti-competitive and dominant practices. This has resulted in economic loss to the plaintiffs and enrichment of the defendants.

Monopoly power, pump-and-dump and money laundering

In the complaint, the plaintiffs allege that Bitfinex and Tether shared false information about USDT being supported 1:1 by US dollars. Only the New York prosecution’s investigation showed that only 74 percent of Tether is covered by US dollars and the remaining 26 percent, according to Tether, is supported only by “claims” and “cash equivalents” from creditors.

Part-fraud, part-pump-and-dump, and part-money laundering, the scheme was primarily accomplished through two enterprises —Bitfinex and Tether —that commingled their corporate identities and customer funds while concealing their extensive cooperation in a way that enabled them to manipulate the cryptocurrency market with unprecedented effectiveness.

The plaintiffs further allege that USDT was used to purchase Bitcoin and subsequently inflate the crypto market. This has fueled the bull market at the end of 2017 and ultimately led to the bursting of “the bubble”. In the published document, the plaintiffs’ attorneys describe Tether as one:

sophisticated scheme that coopted a disruptive innovation —cryptocurrency —and used it to defraud investors, manipulatemarkets,and conceal illicit proceeds

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But the lawsuit does not only claim that the defendants manipulated the cryptocurrency market. Tether and Bitfinex are also accused of a cartel infringement because “the defendant Tether controls more than 80 percent of the stable coin market in the United States and the world”, which gives Tether a “monopoly power”.

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. From 2017 through 2018, Tether printed 2.8 billion USDT and used it to floodthe Bitfinex exchange and purchase other cryptocurrencies.This artificially inflated demand for cryptocurrencies and caused prices to spike.

In addition, the lawsuit accuses Tether and Bitfinex of bank fraud, money laundering and the operation of an unlicensed money transfer company.

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The lawsuit is the latest development in a series of controversies surrounding the USDT stable coin. Last year, University of Texas researchers published an investigation that the price of Bitcoin was manipulated by Bitfinex and the tether emissions. In April of this year, the New York public prosecutor’s office initiated proceedings against Bitfinex and Tether for mixing corporate funds.

A few days ago the crypto analysis company Token Analyst published a study which found that the Bitcoin price rose on days when USDT ERC20 were printed in 19 of 27 days (70 percent) and on 12 of 24 days (50 percent) at USDT Omni.

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About Author

Jake Simmons has been a crypto enthusiast since 2016, and since hearing about Bitcoin and blockchain technology, he's been involved with the subject every day. Beyond cryptocurrencies, Jake studied computer science and worked for 2 years for a startup in the blockchain sector. At CNF he is responsible for technical issues. His goal is to make the world aware of cryptocurrencies in a simple and understandable way.

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