A class-action lawsuit filed on Sunday accuses Bitfinex and Tether of manipulating the price of Bitcoin, and “propping and popping the largest bubble in history,” Bloomberg reports. The lawsuit alleges that the defendants’ actions have likely caused damages of more than $1.4 trillion.
The lawsuit’s named defendants include Bitfinex and Tether, as well as Digfinex which is the primary owner of both companies. Also included are those companies’ current executives, Crypto Capital, and the former chief strategy officer for Bitfinex, Phil Potter. The lawsuit’s plaintiffs include a group of individual cryptocurrency investors.
The lawsuit accuses the defendants of crimes ranging from bank fraud and wire fraud to money laundering and operating an unlicensed money transmitting business. According to the plaintiffs, it is too early to determine the exact extent of the damages:
“Calculating damages at this stage is premature, but there is little doubt that the scale of harm wrought by the Defendants is unprecedented. Their liability to the putative class likely surpasses $1.4 trillion US dollars.”
In describing the alleged price manipulation, the complaint notes the unique relationship between tether and the Bitfinex exchange. As Bloomberg reported:
Because Tether’s owners also own the Bitfinex exchange, the suit alleged, they can execute effectively unbacked Bitcoin buy orders that don’t cost them anything with unbacked Tether. Tether claimed to be backed 1:1 by fiat reserves, but its issuer revealed earlier this year that it may also use other assets to support its value. The buy orders can artificially push up prices in the illiquid crypto market, the complaint said.
The plaintiffs in the case are being represented by Roche Freedman LLP.
For its part, Tether attempted to preempt the news with an October 5thpost on its website that denied any allegations of market manipulation while deriding a recent study that claimed to find evidence of the company’s market abuse. In the post, the company suggested that the paper was created to prepare the way for a “meritless and mercenary lawsuit.” Tether vowed to fight any legal action:
“We fully expect mercenary lawyers to use this deeply flawed paper to solicit plaintiffs for an opportunistic lawsuit, which may have been the true motive of the paper all along. In fact, we would not be surprised if just such a lawsuit will be filed imminently. In advance of any filing, we want to make clear our position that any claims based on these insinuations are meritless, reckless and a shameless attempt at a money grab. Accordingly, Tether will vigorously defend itself in any such action.”