Key Points
- Tether and Bitfinex face another lawsuit accusing them of manipulating cryptocurrency prices.
- Despite legal challenges, Tether remains the dominant force in the stablecoin market.
A new lawsuit has been lodged against Tether, the stablecoin issuer, and Bitfinex, the cryptocurrency exchange.
The plaintiffs have once again accused Tether and Bitfinex of manipulating the prices of Bitcoin (BTC) and other digital assets. They claim that the defendants artificially inflated the price of cryptocurrencies by buying large amounts of coins at specific times, creating a false impression of high demand.
Allegations Against Tether and Bitfinex
The complaint alleges that Tether issued billions of USDT to itself without any US dollar backing, leading to billions of dollars of damage to innocent cryptocurrency purchasers.
The initial claim stated that over the years, Tether issued $3 billion worth of unbacked USDT tokens, which Bitfinex then used to buy cryptocurrencies to support prices during market downturns. This allegedly led to a sharp increase in the cryptocurrency market’s capitalization to $795 billion by the end of 2017.
The lawsuit against Tether and Bitfinex began in 2019, but so far, it has not resulted in any outcomes, and the case is at risk of falling apart. The defendants attribute this to the baseless nature of the accusations.
Legal Proceedings and Responses
The plaintiffs, five cryptocurrency traders, claimed that they bought cryptocurrencies at inflated prices and suffered significant losses. However, the defendants’ lawyers argued that the charges were based on unsubstantiated allegations and not on direct knowledge of the matter.
Bitfinex has stated that it will not negotiate with the plaintiffs and will fight the allegations in court. Paolo Ardoino, the exchange’s technical director, has publicly expressed his intention to fight the lawsuit.
In 2020, the plaintiffs accused cryptocurrency exchanges Bittrex and Poloniex of aiding Tether and Bitfinex during the Bitcoin rally in 2017. They claimed that Bittrex and Poloniex were directly involved in the scheme by creating the illusion of fresh liquidity flowing into the market through multiple buy orders for BTC.
In February 2021, Bitfinex and Tether settled a legal dispute with the New York City Attorney’s Office, agreeing to pay $18.5 million in fines and provide quarterly reports on their activities. The settlement aimed to resolve concerns about the validity of the reserves backing USDT.
Despite facing numerous lawsuits, Tether continues to dominate the stablecoin market. The market capitalization of USDT has reached a record $113 billion, accounting for 70% of the stablecoin market. This growth suggests that the digital currency market is accumulating more capital, further strengthening Tether’s position.
