Earlier this week, Bitfinex and Tether both released blog posts in which they stated that they anticipate an incoming lawsuit against them with allegations of market manipulation and fraud. They argue that this lawsuit is based on an unpublished paper that has a flawed methodology and biased information and that they intended to defend themselves and they also firmly denied that they had ever engaged in any form of market manipulation. This comes after years of speculation that Tether has been a bitcoin price manipulation tool and also the recent investigation by the New York Attorney General’s office.
It seems the information they received was correct as Freeman, a New York-based law firm has launched a class action lawsuit against Bitfinex and Tether accusing them of market manipulation, defrauding investors as well as hidining illicit gains.
The complaint document was filed on October 6, 2019 and accused the two firms of taking part in an elaborate scheme that is “part-fraud, part-pump-and-dump, and part-money laundering.”. Roche Freedman, who is a founding partner of the firm also tweeted about the issue on October 7, 2019 and stated that Bitifnex and Tether had created biggest bubble in financial history.
One of the points raised in the lawsuit is that Tether does not back up 100 percent of its tokens with US dollars as previously claimed. The investigation opened by the New York Attorney General‘s office already revealed that only 73 percent of Tether tokens are backed up by US dollars. However, this class action lawsuit claims that Tether had been deliberately releasing large amounts of unbacked USDT into the market to manipulate the price.
“Because the market believed the lie that one USDT equaled one U.S. dollar, Bitfinex and Tether had the power to, and did, manipulate the market on an unprecedented scale to profit from boom-and-bust cycles they created,” the document claims.
Tether and Bitfinex have been embroiled in controversy for a long time and this seems to only be one of the latest. Even though the companies have stated that the anticipated the lawsuit, it does mean that they once again find themselves back in court trying to clear their names. If the previous investigation by the attorney generals office is anything to go by, there will likely be some interesting revelations by the end of this case.