Class Action Accuses Tether and Bitfinex of Market Manipulation

The Block

The Block

A New York-based legal firm has filed a lawsuit against Tether and Bitfinex, accusing them of cryptocurrency market manipulation.

The lawsuit filed by Roche Freedman specifically accused Bitfinex and its subsidiary of creating a "sophisticated scheme" that took advantage of the cryptocurrency innovation to "defraud investors, manipulate markets and hide illicit proceeds". The plaintiff claims the defendant's actions amounted to over $1.4 trillion United States dollars in losses.

This comes some months after the company was dragged for lying to the general public that its stablecoin is completely backed by the United States' official currency - the US dollar.

Remarkably, the lawsuit takes into consideration Tether and Bitfinex's own preemptive rebuttal, describing it as an indication that the companies are "fully aware of the incredible harm they've inflicted on the cryptocurrency market".

"The crimes committed by Tether, Bitfinex, Crypto Capital, and their executives include Bank Fraud, Money Laundering; Monetary Transactions Derived From Specified Unlawful Activities, Operating an Unlicensed Money Transmitting Business, and Wire Fraud", the filing states. They violated the US Commodity Exchange Act, the RICO (Racketeer Influenced and Corrupt Organizations) Act, and money laundering law.

Count V alleges a violation of the federal RICO statute, which aims to prevent organized crime. Lastly, Count VIII seeks injunctive relief. Roche Freedman, which recently won the lawsuit against Craig Wright, who claims he created bitcoin, represents the plaintiffs.

Bitfinex, Tether, Digfinex, and current executives; former chief strategy officer Philip Potter; and payment processor Crypto Capital are named as the case's defendants.

Bitfinex fired back, saying that "Bitfinex and its affiliates have never used Tether tokens or issuances to manipulate the cryptocurrency market or token pricing", and that it was "irresponsible" to suggest otherwise. Tether claimed to be backed 1:1 by fiat reserves, but its issuer revealed earlier this year that it may also use other assets to support its value.

Meanwhile, in his daily commentary, Mati Greenspan, Senior Market Analyst at eToro, stressed that in major financial institutions across the globe, the process of creating unbacked currency for the goal of purchasing financial assets and propping-up market prices is simply known as common practice.

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