Tether and Bitfinex Face Amended Class Action Lawsuit for Market Manipulation

Highlights:

• Prosecutors allege Tether and Bitfinex manipulated crypto prices with unbacked USDT, inflating market demand.
• The amended complaint streamlines previous allegations, focusing on market manipulation and antitrust violations.
• Tether’s spokesperson claims the lawsuit’s allegations are baseless and lacks supporting evidence.

Stablecoin issuer Tether and its sister company Bitfinex face fresh allegations in an amended class-action lawsuit filed in the Southern District of New York. The prosecutors accuse the companies of conspiring to manipulate cryptocurrency market prices through a sophisticated scheme involving Tether’s USDT stablecoin.

The latest class action lawsuit against Bitfinex & Tether presents evidence that they use bots to inflate Bitcoin prices with artificial USDT.

Many others and I have been telling you all for ages: when Tether crashes, BTC crashes. https://t.co/c9wKKt4KN5 pic.twitter.com/tolQrM9m22

— xoom (@Mr_Xoom) July 15, 2024

Accusations of Market Manipulation and Antitrust Violations

The lawsuit, filed by U.S.-based crypto traders Matthew Script, Benjamin Leibowitz, Jason Leibowitz, and Pinchas Goldshtein, alleges that Tether and Bitfinex artificially inflated cryptocurrency prices by injecting billions of unbacked USDT into the market. The prosecutors claim this created the illusion of increased demand, driving up prices and helping credit trading and loan funds. The complaint asserts that these actions violated both the Commodities Exchange Act (CEA) and the Sherman Antitrust Act.

The amended complaint, the third in this ongoing case, focuses on three main allegations: market manipulation, monopolization, and restraint of trade. This iteration is a pared-down version of previous complaints containing many accusations. The prosecutors argue that Tether issued billions of USDT without sufficient U.S. dollar backing. As a result, they claim this misled investors and caused significant financial harm.

Legal Hurdles and Controversies

The case has encountered several setbacks since its inception in 2019, including removing the original prosecutors’ counsel. Controversial video recordings showed one of its attorneys, Kyle Roche, admitting to filing frivolous lawsuits to aid clients, leading to the law firm Roche Freedman’s firing. Despite these challenges, the prosecutors have persisted, refining their complaint to focus on core allegations of market manipulation and antitrust violations.

In their latest filing, the prosecutors presented chat and deposition logs from Tether and Bitfinex operators, which allegedly reveal admissions of manipulative actions. For instance, Tether’s Chief Financial Officer Giancarlo Devasini reportedly admitted issuing substantial credit lines without proper backing. Consequently, this action could artificially inflate Bitcoin prices.

Defendants’ Response and Ongoing Legal Battle

A representative for Tether has dismissed the latest allegations as unfounded, asserting that the claims are “wholly without merit.” The representative emphasized that the company remains confident in its ability to prevail in court, labeling the prosecutors’ accusations as “nonsensical conspiracy theories.”

In the previous year, Tether and Bitfinex’s legal team opposed the prosecutors’ motion to amend their complaint. They argued that it was an attempt to restart the case after closing the discovery process. Consequently, the opposition was a strategic move to maintain their legal position. However, Judge Katherine Polk Failla granted the motion, authorizing the prosecutors to file their second amended complaint.