A class action lawsuit filed over the weekend (pdf) alleges that Bitfinex, Tether, and others have been inflating cryptocurrency prices by “issuing extraordinary amounts of unbacked USDT.”
The suit, which was filed in New York by Vel Freedman and Kyle Roche – the same lawyers who successfully sued Craig Wright – claims that the inflated number of tokens created a sense of rapidly growing demand for crypto, leading traders to buy into “the largest bubble in human history.”
Here’s how the plaintiffs opened their filing:
“This action concerns a sophisticated scheme that co-opted a disruptive innovation — cryptocurrency — and used it to defraud investors, manipulate markets, and conceal illicit proceeds.
Part-fraud, part-pump-and-dump, and part-money laundering, the scheme was primarily accomplished through two enterprises — Bitfinex and Tether — that commingled their corporate identities and customer funds while concealing their extensive co-operation in a way that enabled them to manipulate the cryptocurrency market with unprecedented effectiveness.”
“The crimes committed by Tether, Bitfinex, Crypto Capital, and their executives,” the filing said, “include Bank Fraud (18 U.S.C. §1344), Money Laundering (18 U.S.C. §1956); Monetary Transactions Derived From Specified Unlawful Activities (18 U.S.C. §1957), Operating an Unlicensed Money Transmitting Business (18 U.S.C. 1960), and Wire Fraud (18 U.S.C. §1343).”
How much did all these cost investors? While they admit that it’s a bit too early to calculate damages, the plaintiffs claim that it “likely surpasses $1.4 trillion US dollars.”
Tether, for its part, claims that the accusations are “meritless, reckless and a shameless attempt at a money grab,” adding that “Tether will vigorously defend itself in any such action.”
“These baseless accusations are an attempt to undermine the growth and success of the entire digital token community, of which Tether is a key part. It is an attack on the work and dedication of not just Tether’s stakeholders, but thousands of our colleagues, too,” the company said.
Bitfinex, Tether’s affiliated company, issued a similar statement, with the word “Bitfinex” replacing “Tether” through much of it.