A common attack against Tether in the acute system is that the stablecoin is not as such backed by the US dollar. The truth is, however, set to be known if these allegations are significant or substantial as the matter is as of now headed towards the court.
A new lawsuit against the operators of USDT alleges that they have created the largest bubble known to human history and have been liable for causing over a trillion dollars in damages. A class-action lawsuit against the operators of Tether and the BitFinex exchange was filed on Sunday with the United States District Court for the Southern District of New York.
Therein the lawsuit contains allegations of the group’s management of a sophisticated scheme aimed at defrauding investors and even manipulating markets. The accusations also include the concealment of unlawful proceeds.
This comes just a day after the two companies, that is, Tether and the bitfinex exchange notified users of an imminent legal action, which they were aiming to frame as a money solicitation attempt. According to the complainant, bitfinex and Tether colluded in their corporate individualities and customer funds, all the while concealing the extensive scheme.
The complaint also instigates that they lied to investors claiming that the number of US dollar tokens in circulation would always be equal to the number of dollars in the company’s bank coffers. Following these allegations, they had the power to fake market demand for cryptocurrencies by just printing more USDT and using it to acquire more coins.
Part of the complaint reads, “tether issued extra-ordinary amounts of impact USDT to influence cryptocurrency prices. As the market believed the lie that one USDT equals one US 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 amount of influence that is allegedly in the crypto market, that the lawsuit allocates to the stablecoin is significant. It reports that from the year 2017, following through to the year 2018, Tether did print 2.8 billion USDT and used it to flood the BitFinex exchange, which artificially and intentionally inflated the demand for cryptocurrencies thereby causing a spike in the prices.
Economists have cited the complaint estimating that as much as half the growth in the crypto-currency market at that time was fostered by this manipulative scheme.
They continue to say, “As the cryptocurrency market reached a fever pitch, tethers issuance of USDT created the largest bubble in human history. When it passed, over USD 450 billion of value disappeared in less than a month.”