Tether and Bitfinex Face Amended Class Action Lawsuit for Alleged Market Manipulation

Stablecoin issuer Tether and its affiliate cryptocurrency exchange Bitfinex are at the center of an escalated legal battle as they face intensified allegations in an updated class action lawsuit. The lawsuit, which accuses both entities of market manipulation, has been filed with the United States District Court Southern District of New York. This litigation marks a significant challenge to the operations of both Tether and Bitfinex, underlining the ongoing scrutiny that major players in the cryptocurrency landscape are facing over their business practices.

The amended lawsuit, which outlines three primary causes of action against the defendants, alleges that Tether and Bitfinix engaged in a concerted effort to manipulate the cryptocurrency market. This purported scheme involved the issuance of USDT, a USD-backed stablecoin, in quantities not fully supported by US dollars, thereby creating an artificial perception of increased demand for cryptocurrencies. This maneuver is alleged to have facilitated trading on credit and leveraged funds, contributing to inflated cryptocurrency prices across the market.

Plaintiffs Matthew Script, Benjamin Leibowitz, Jason Leibowitz, Aaron Leibowitz, and Pinchas Goldshtein have brought forward this lawsuit, streamlining their grievances from a previously broader complaint. The current filing is a pared-down version of their earlier legal action, which initially included eight causes of action and was later expanded to twelve in a subsequent amendment. The focus of the plaintiffs’ claims centers on accusations of violating the Commodities Exchange Act (CEA) through market manipulation, monopolization, and agreements in restraint of trade.

This lawsuit is not the companies’ first encounter with legal challenges. Over the past years, both Tether and Bitfinex have navigated through various allegations and regulatory inquiries. However, the current legal action is notable for its direct accusations of market manipulation, a serious charge that implicates fundamental aspects of their operation and the broader cryptocurrency market’s integrity.

The suit has undergone notable procedural developments, including the removal of Roche Freedman, the law firm initially representing the plaintiffs. This change came after video recordings surfaced, revealing unsavory comments by Kyle Roche, a founding partner of the firm. In these videos, Roche appeared to boast about filing frivolous lawsuits to benefit his clients, casting doubt on the firm’s motivations and tactics in pursuing legal action against cryptocurrency entities.

Despite these serious allegations, a spokesperson for Tether has dismissed the claims made in the second amended complaint, asserting they lack merit. This defense underscores the contentious nature of the lawsuit and signals a potentially protracted legal battle ahead.

The implications of this lawsuit extend beyond the immediate concerns of Tether and Bitfinex, touching on broader issues of market integrity, regulatory compliance, and the need for transparency in the cryptocurrency sector. As the legal proceedings unfold, the outcome may have significant repercussions for the accused parties and set precedents for how similar cases are approached in the future.

The cryptocurrency community and investors are closely watching this case, as its resolution could influence market perceptions and regulatory approaches to stablecoins and other digital assets. With the rapid evolution of the cryptocurrency market, the legal challenges faced by Tether and Bitfinex highlight the growing pains of an industry striving for legitimacy and stability amidst its meteoric rise and the scrutiny that accompanies it.