Hong Kong-based cryptocurrency exchange, Bitfinex, and its subsidiary Tether Ltd have a legal battle to contend with, following lawsuit filed against the two entities in the US.
The lawsuit specifically accused Bitfinex and its subsidiary of creating a ‘sophisticated scheme’ that took advantage of the cryptocurrency innovation to “defraud investors, manipulate markets and conceal illicit proceeds.” The alleged scheme involved the buildup to the 2017-2018 crypto market bull run that saw Bitcoin (BTC) hit prices near $20,000 within a few months, as other cryptocurrencies skyrocketed within the same period.
What’s the lawsuit saying
The plaintiff claimed that the two firms commingled their corporate identities and customer funds and at the same time concealing their cooperation in a way that enabled them to manipulate the cryptocurrency market.
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More precisely, Tether is alleged to have issued 2.8 billion of its tokens called USDT between 2017 and 2018 and used it to flood their exchange to buy cryptocurrencies, a move that “artificially inflated demand for cryptocurrencies and caused prices to spike,” according to the lawsuit.
The lawsuit went to to say that the increased demand and spike in prices created the ‘largest bubble in human history,’ which, when it burst in early 2018 and saw $450 billion of value disappear from the crypto markets in less than a month. As a result, the fall in value “continues to affect the cryptocurrency market, including by causing prices to be lower than they would have been but for the manipulation”.
Conclusively, the plaintiff noted that calculating damages caused by the manipulative scheme at this stage is premature even though the liability is around $1.4 trillion.
Bitfinex and Tether’s Response?
Although the accused firms are yet to issue another official response following the filing of the lawsuit on October 6, they did publish updates roughly 24 hours before it was filed. In the updates, both Bitfinex and Tether claimed that the insinuations in the then-anticipated lawsuit are “meritless, reckless, and a shameless attempt at a money grab.”