Tether Faces Class Action Lawsuit Seeking $1 Trillion in Damages
Just days after Tether and Bitfinex posted preemptive messages warning of a “mercenary” lawsuit, a class action was filed, seeking $1.4 trillion in damages.
A class-action lawsuit has been filed against iFinex, the umbrella company running Bitfinex, as well as Tether, Inc. After months of suggestions that Tether was the chief reason for the rallies in Bitcoin (BTC) prices, finally the companies were taken to court. The new lawsuit takes off where the New York Attorney General (NYAG) has not been given leeway to explore.
Curiously, the lawsuit was announced just days after both Tether, Inc. and Bitfinex announced they anticipated an unfounded and “mercenary” lawsuit. The companies kept claiming that each USDT coin was backed by “reserves”, though not claiming they were backed by dollars. Tether also claimed that printing new USDT was solely based on real demand, and not a deliberate effort to affect BTC.
Skeptics first noted a strange coincidence of large-scale USDT printings that preceded BTC price action. Now, the lawsuit verbalizes this concern that has been shared over social media multiple times.
The plaintiffs called the actions of iFinex “part fraud, part pump-and-dump and part money-laundering”, as Tether and Bitfinex commingled their corporate identities and customer funds. The companies concealed their connection well enough to perform highly efficient operations on the cryptocurrency market.
The plaintiffs see the operation as massive, leading to a demand for $1.4 trillion in damages. The lawsuit claims that from 2017 onward, the actions of USDT printing led to the biggest bubble in history, but later exacerbated the losses, erasing more than $450 billion in a month.
Currently, there are more than 4.1 billion USDT on the market, circulating on most leading exchanges. About half of the USDT liquidity goes into the BTC market, while the rest boosts the position of a small selection of altcoins. While no new USDT has been minted recently, on certain days, the existing USDT supply has a significant impact.
Real fiat cryptocurrency markets are much smaller by comparison. USDT is widely used to avoid slow transfers of funds or other limitations when moving fiat internationally. A crash of trust in USDT has happened before, tanking the price as low as $0.85. But USDT recovered, becoming even more influential. If USDT trading is lost today, almost all exchange activity would freeze, as USDT participates in 35% of all trades and is the most active digital coin within the crypto space.