Tether and Bitfinex Lawsuit: Accused of Market Manipulation and Price Pumping, Tether Denies Conspiracy Theory

Coindesk reports that in the ongoing five-year class-action lawsuit against stablecoin issuer Tether and its sister exchange Bitfinex, plaintiffs have filed a third amended complaint alleging that the two companies engaged in market manipulation in the cryptocurrency market, violating the Commodity Exchange Act (CEA) and the Sherman Antitrust Act.

Collective Lawsuit Against Tether and Bitfinex

Documents filed in the Southern District of New York indicate that there have been new developments in the collective lawsuit against Tether and Bitfinex that originated in 2019, with the plaintiffs submitting a simplified amended complaint.

This is the third complaint filed in this lawsuit, with the initial two being filed and amended in 2019 and 2020, containing 8 and 12 allegations respectively, now reduced to 3.

Price Manipulation

The plaintiffs allege in the complaint that Tether and Bitfinex "orchestrated a sophisticated scheme" to fraudulently boost cryptocurrency prices including Bitcoin:

The two companies pushed USDT into the market through "extensive and carefully orchestrated buying and selling activities," creating a false impression of strong demand to drive up cryptocurrency prices.

The complaint even reveals chat records of Tether's Chief Financial Officer Giancarlo, indicating their awareness of engaging in manipulative behavior:

Giancarlo admitted in prior testimony that after promoting increased demand, they provided users with "unbacked" large amounts of USDT loans, allowing them to "use this fake money" to purchase large amounts of cryptocurrencies, thereby driving up prices.

USDT Unbacked by Reserves

The plaintiffs also emphasize that Tether provided funding for market manipulation through billions of USDT, indicating that their USDT is not backed one-to-one by USD:

In fact, Tether issued billions of USDT without USD backing, essentially creating them out of thin air.

They further state, "The two companies used unsupported USDT to purchase large amounts of cryptocurrencies, ultimately causing innocent cryptocurrency investors to suffer billions of dollars in losses."

However, similar allegations were previously dismissed by another judge in a separate lawsuit against Tether, where the plaintiffs also claimed that the 1:1 reserve backing of USDT was a false statement.

Court Dismisses Claim of Lack of 1:1 Support for USDT, Tether States: Allegations Baseless

Alleged Violations of the Commodity Exchange Act and Sherman Antitrust Act

As a simplified version of the previous lawsuit, the plaintiffs have leveled the following three accusations against the two companies:

1. Market manipulation, violating the Commodity Exchange Act CEA

2. Monopoly, violating the Sherman Antitrust Act Sherman Act

3. Restraint of trade agreements, violating the Sherman Antitrust Act Sherman Act

Tether: Baseless Conspiracies

Tether condemns the accusations in the amended complaint, stating that they are just as baseless as the previous claims:

Facts and evidence matter most, not the plaintiffs' false and misleading allegations. We are confident in our ability to prevail in this lawsuit, and the plaintiffs' absurd conspiracy theories will be rejected.

However, Tether has indeed faced scrutiny from various institutions and media for its lack of regulatory compliance and operational transparency, often focusing on its opaque reserve and minting mechanisms.

Tether in Battle with Media! Documents Reveal Tether's Reserve Assets Involved Chinese Corporate Securities