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In a new class-action lawsuit, marking the second such case against the defendants, crypto exchange Bitfinex and stablecoin issuer Tether stand accused of market manipulation. In a filing dated November 22, Eric Young and Adam Kurtz list several complaints, alleging that the two companies conspired to monopolize the Bitcoin market.
According to the filing,
“Defendants’ control of USD? issuances and Bitfinex permitted Defendants and their co-conspirators to coordinate purchases and sales with rising and falling Bitcoin prices. When Bitcoin prices were falling, Defendants and their co-conspirators printed USD?s and artificially increased the price of Bitcoin. Once Defendants and their co-conspirators artificially inflated the price of Bitcoin, Defendants and their co-conspirators then converted the Bitcoin back into USD?s to replenish Tether’s reserves.”
[adinserter block="1"]Bitfinex issued a response dated November 24. The exchange characterizes the lawsuit, which was filed in U.S. District Court for the Western District of Washington, as “mercenary and baseless”.
“This copycat lawsuit suffers from the same multitude of deficiencies as the unsound complaint filed in the U.S. District Court for the Southern District of New York on October 6. The Plaintiffs’ claims here are similarly without merit, and Bitfinex strongly contests the bogus research purporting to support them.”
Bitfinex refers to a heavily cited academic paper written by a finance professor and a graduate student at the University of Texas that tracks Bitcoin’s meteoric rise to nearly $20,000 in January of 2018 and theorizes how Tether, which ranks along with Bitcoin as the world’s most heavily traded cryptocurrency, is used to control the market.
The authors write,
“When prices are falling, the Tether creators can convert their Tether into Bitcoin in a way that pushes Bitcoin up and then sell some Bitcoin back into dollars to replenish Tether reserves as Bitcoin price rises. Finally, if cryptocurrency prices crash, Tether creators essentially have a put option to default on redeeming Tether, or to potentially experience a ’hack’ where Tether or related dollars disappear.”
Bitfinex argues in their latest post that it has never tried to manipulate Bitcoin or its price, and that the new lawsuit is another attack against the growing cryptocurrency movement.
[adinserter block="1"]“These absurd and groundless accusations are an attack on the growth, success and innovation of the entire digital token ecosystem, in which Bitfinex is proud to play a critical role. Meritless lawsuits like these are a continuing affront to the efforts and dedication of Bitfinex’s customers and all participants in the digital currency ecosystem. Our fight is the community’s fight.”
Tether remains in heavy use, trading $34.4 billion in the last 24 hours.
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