Crypto Traders’ Lawsuit Claims Bitfinex, Tether Cost Market Over $1 Trillion

Crypto Traders' Lawsuit Claims Bitfinex, Tether Cost Market Over $1 Trillion

A new lawsuit claims exchange Bitfinex and its sister company Tether manipulated the crypto market, harming traders and benefiting themselves.

Bitfinex and a number of affiliated entities engaged in deceptive, anti-competitive and market manipulative practices, resulting in economic damages for the plaintiffs, according to a class action lawsuit filed Sunday in New York.

Notably, the plaintiffs claim that the total damages add up to more than $1 trillion, writing:

“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.”

The lawsuit, filed by David Leibowitz, Benjamin Leibowitz, Jason Leibowitz, Aaron Leibowitz and Pinchas Goldshtein, are represented by Vel Friedman and Kyle Roche – the lawyers who recently won a federal court case against Craig Wright. Bitfinex, Tether, Digfinex and current executives; former chief strategy officer Philip Potter; and payment processor Capital are named as defendants in the case. 

“The crimes committed by Tether, Bitfinex, 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 says.

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In the complaint, the plaintiffs further claims Bitfinex and Tether “shared false information about USDT being backed 1:1 by U.S. dollars,” referring to an allegation made by the New York Attorney General’s office in April. It continues to allege the USDT was used to purchase to flood the market, spurring the 2017/8 bull market and subsequent bust. 

Market manipulation?

In response to a request for comment, Bitfinex/Tether spokesperson Joe Morgan sent CoinDesk a statement published over the weekend, which stated that the companies expected a lawsuit based on “an unpublished and non-peer reviewed paper falsely positing that Tether issuances are responsible for manipulating the market.”

It went on to add:

“Tether and its affiliates have never used Tether tokens or issuances to manipulate the market or token pricing. All Tether tokens are fully backed by reserves and are issued pursuant to market demand, and not for the purpose of controlling the pricing of crypto assets. It is irresponsible to suggest that Tether enables illicit activity due to its efficiency, liquidity and wide-scale applicability within the cryptocurrency ecosystem.”

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The plaintiff’s lawyers did not respond to questions for comment by press time.

Allegations that Tether has been used to manipulate the market have existed for more than a year. In a study published last June, researchers with the University of Texas at Austin said ’s price rose after the “the Bitfinex exchange use[d] tether to purchase bitcoin when prices are falling.”

The U.S. Department of Justice is reportedly looking into the allegations, though it is unclear if the Department has drawn any conclusions at this time.

However, another study published last September by University of Queensland professor Wang Chun Wei, found that while “tether grants were potentially timed to follow downturns,” the actual correlation was “not statistically significant.”

Read the full lawsuit:

Putative Class Action Bitfinex Tether by CoinDesk on Scribd

Bitfinex image via Shutterstock

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