We knew that there was a shitstorm coming Tether’s way because over the weekend, we were sent a press release by the company telling us that “Tether Anticipates Meritless and Mercenary Lawsuit Based on Bogus Study”.
The suit was made public on Monday, having been filed on Saturday in Court of the Southern District of New York by Vel Freedman and Kyle Roche.
Notably, they are the same lawyers who recently (and successfully) sued Craig Wright on behalf of Ira Kleiman.
For those who don’t know, Tether is a “stablecoin” — ie a digital-only currency whose value is pegged to the dollar — that is used by crypto traders to get in and out of positions quickly on exchanges. It has long been alleged, by critics such as blogger Bitfinex’ed, that Tether is used to manipulate the price of bitcoin and other cryptocurrencies. And that’s precisely what this lawsuit is alleging.
The plaintiffs don’t pull any punches (emphasis ours):
This action concerns a sophisticated scheme that co-opted a disruptive innovation — cryptocurrency — and used it to defraud investors, manipulate markets, and conceal illicit proceeds.Part-fraud, part-pump-and-dump, and part-money laundering, the scheme was primarily accomplished through two enterprises — Bitfinex and Tether — that commingled their corporate identities and customer funds while concealing their extensive co-operation in a way that enabled them to manipulate the cryptocurrency market with unprecedented effectiveness.
They also present a pretty eye-popping estimation of the scale 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.
This, they argue, “created the largest bubble in human history”.
Tether, of course, “vigorously disputes the findings and conclusions claimed by that source, which rely on flawed assumptions, incomplete and cherry-picked data, and faulty methodology”.The company also insists that “all Tether tokens are fully backed by reserves and are issued pursuant to market demand, and not for the purpose of controlling the pricing of crypto assets”.
However, as the class action suit points out, until February this year the company’s website continued to say that every USDT (Tether) token in circulation was “backed 1-1 by traditional currency held in our reserves”.
Then suddenly in March, when under criminal investigation by the US Department of Justice, the CFTC, and the New York Attorney General, Tether changed it to say that every USDT token was “1-1 pegged to the dollar” and “100% backed” by reserves that “from time to time may include other assets”.
And then in April, Tether’s own lawyer was forced to admit in court that the stablecoin is only 74 per cent backed by cash and cash equivalents.
The plaintiffs write:
If there was any doubt before, it’s now absolutely clear that Tether no longer has cash reserves to back USDT at a 1:1 ratio.The Bitfinex and Tether Defendants engaged in unfair, deceptive, untrue or misleading acts by omitting, or failing to disclose the material fact that USDT was not backed 1:1 and that the market demand created by the Bitfinex and Tether Defendants was fraudulent.
The Bitfinex and Tether Defendants’ deceptive practices were consumer-oriented aimed at manipulating the cryptocurrency market and thereby transfer wealth from consumers to themselves.
We will watch how this shitstorm unwinds on Bitfinex. Hopefully Tether & Bitfinex will finally respond in front of law.
In the end this should be considered a large-scale money laundry & illegal financial operation on International level on which multiple international enforcement agencies should step-in. Tether & Bitfinex was always the CANCER of Bitcoin & crypto, now the leash is getting tigheter around their neck.
Posted from my blog with SteemPress : https://247cryptonews.com/tether-bitfinex-slammed-with-the-truth-reality-of-their-manipulation/