Class action lawsuit alleges Bitfinex’ Tether cost crypto market $1.4T

A brand new lawsuit alleges that cryptocurrency exchange Bitfinex and its sister company Tether manipulated the digital currency market.

According to a lawsuit filed in New York over the weekend, Bitfinex and Tether “engaged in unfair, deceptive, untrue or misleading acts” by failing to disclose that Tether was not backed 1:1 to by the US dollar.

Other defendants named in the suit include Digfinex (the majority owner of Bitfinex and Tether)and its current executives, payment processor Crypto Capital, and Bitfinex’s former chief strategy officer Phil Potter, who reportedly left the company in January last year.

“The Tether and Bitfinex Defendants have systematically perpetrated deceptive and unfair practices upon members of the public and have intentionally deceived the market,” the document adds.

The plaintiffs, cryptocurrency traders David Leibowitz, Benjamin Leibowitz, Jason Leibowitz, Aaron Leibowitz, and Pinchas Goldshtein estimate the damages at more than $1 trillion.

The 💜 of EU tech

The latest rumblings from the EU tech scene, a story from our wise ol' founder Boris, and some questionable AI art. It's free, every week, in your inbox. Sign up now!

“Calculating damages at this stage is premature, but there is little doubt that the scale of harm wrought by the Defendants is unprecedented,” they claim. “Their liability to the putative class likely surpasses $1.4 trillion US dollars.”

“The crimes committed by Tether, Bitfinex, Crypto 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.

It’s not the first time Tether makes headlines for unsavory reasons. Back in May, Tether admitted it used its reserves to buy Bitcoin and other “assets.”

At the time, court documents detailed how New York Supreme Court Judge Joel M. Cohen was becoming increasingly suspicious of Bitfinex’s and Tether’s dealings – especially after both companies fessed up that the stablecoin wasn’t entirely backed by cash, contrary to its marketing claims.

More recently, the New York Attorney General (NYSAG) ruled that Bitfinex could stop sharing documents about its use of Tether in an entirely different case.

The decision was taken after the exchange won a motion over an alleged $850 million cover-up.

Tether has long been at the center of rumors and conspiracy theories amongst industry insiders, and this additional (and suspiciously frivolous) class action lawsuit isn’t likely to make things easier for the world’s most popular stablecoin.

What’s next in blockchain? Join Hard Fork Summit on October 15-17 to find out. With experts like Larry Sanger, co-founder of Wikipedia, on the lineup, it’s not one to miss.