The class action alleges that the company fraudulently raised the value of the cryptocurrency market by issuing unsecured US dollar tokens, creating "the biggest bubble in human history."
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Tether is the issuer of the stable currency USDT, which until recently claimed that its issued USDT was supported by the US dollar “1:1” on its offshore bank account. But earlier this year, in response to a survey by the Office of the Attorney General of New York (NYAG), Tether admitted that its stable currency was only supported by "74% (dollar funds)."
Today's lawsuit quoted a research report published by the University of Texas in 2018, saying that Tether and its sister company, Bitfinex, artificially created "a growth of up to half of the cryptocurrency market."
The lawsuit states:
“This move is related to a complex plan that uses a disruptive innovation – cryptocurrency – to deceive investors, manipulate the market, and hide illegal gains, including fraud, high shipments and money laundering. The plan is mainly done through Bitfinex and Tether, which mix their corporate identity with client funds and hide their extensive collaboration, enabling them to manipulate the cryptocurrency market with unprecedented efficiency."
The lawsuit was filed by Roche Freedman LLP on behalf of several investors who believed they were "spoofed" by Tether and Bitfinex. These investors said they suffered more than $1.4 trillion in losses. Interestingly, their lawyers also successfully sued CSW in the Federal Court of Florida.
Tether said in a press release on Saturday that the lawsuit was "worthless." The company said it will actively respond to the lawsuit, claiming that the plaintiff's lawyer is a “greedy lawyer” and that the University of Texas research report is “screened” and “never published”.
According to CoinMarketCap, Tether occupies a large share of the cryptocurrency market, and it is believed that the issuance of Tether is related to the rise in market prices. This is likely to be benign: for overseas investors who cannot get dollars, the existence of Tether makes sense, so it makes sense for them to buy USDT in large quantities.
However, in Tether's words, 26% of Tether is only supported by creditors' “accounts receivables” and “cash equivalents.” This disclosure led to some inferences, as the lawsuit said today, “Bitfinex and Tether Billions of unsecured USDT were issued to manipulate the price of Bitcoin and other cryptocurrencies."
It is worth noting that the lawsuit took into account the responses of Tether and Bitfinex a few days ago , saying that the two companies "are fully aware of their incredible damage to the cryptocurrency market."
The lawsuit also pointed to the behavior of Tether's continuous issuance of USDT since the investigation, calling it a "reckless behavior."