“The disappearance of $265 billion in bitcoin wealth was the result of Bitfinex and Tether propping and popping the largest bubble in history.” – Complaint Document, Section 113, Page 35
It’s crunch time for Tether: the company behind controversial stablecoin USD-Tether (USDt), crypto exchange Bitfinex, is now facing a class-action complaint filed by Roche Freedman for allegedly manipulating the cryptocurrency markets during the bull run of 2017. Other potential crimes include deceiving investors, money laundering, and operating as an unlicensed money transmitting business.
Tether, Bitfinex, and others (such as Crypto Capital Corp.) are now being accused of “co-opting a disruptive innovation” and concealing “illicit profit.” The plaintiffs claim that damages caused by the accused total above an astonishing $1 trillion, but as the document states, this is still in the early stages.
“Calculating damages at this stage is premature, but there is little doubt that the scale of harm wrought by the Defendants is unprecedented. Their liability to the putative class likely surpasses $1.4 trillion U.S. dollars.” – Complaint Document, Section 14, Page 5
The controversy around Tether is nothing new and has become a regular ongoing tale of drama for quite some time in the crypto community.
Doubts over the USD-Tether stablecoin being pegged to the U.S. dollar have always been question. It is supposedly backed by reserves that enable it to be pegged to USD at a ratio of 1:1, and events have set industry and community trust and confidence to extremely low levels.
Some of the twists along the road of controversy have been quite shocking. Earlier this year, Tether and Bitfinex were accused of losing over $800 million!
“Bitfinex has already taken at least $700 million from Tether’s reserves. Those transactions – which also have not been disclosed to investors – treat Tether’s cash reserves as Bitfinex’s corporate slush fund, and are being used to hide Bitfinex’s massive, undisclosed losses and inability to handle customer withdrawals.” – Press Release, Attorney General James
Despite other stablecoins emerging and providing investors with alternatives, USDt has grown and currently stands in the top five largest digital assets by market cap at the time of writing. To add to this growth, it has recently surpassed Bitcoin in daily trading volume.
In recent days, Tether and Bitfinex have released statements claiming that they had been made aware of a “meritless and mercenary lawsuit,” accusing the claims against them as “bogus” and “deeply flawed.”
In conclusion to this lawsuit, the U.S. Department of Justice is allegedly looking into the allegations made against Tether, Bitfinex, and others. No official verdict has been given at the time of writing, but this could go on for a considerable amount of time.
This post is for educational purposes. All information used is referenced accordingly. This is not investment advice; please always do thorough research and only invest what you are willing to lose, especially in times of uncertainty.