Bitfinex, the company behind stablecoin Tether (USDT), has secured an important win in a class-action lawsuit levelled against the controversial company. Half of the complainants’ claims were summarily dismissed.
Parent Company Succeeds in Court
Court documents suggest that iFinex (Bitfinex’s parent company) was successful in its application to dismiss claims that it had manipulated the crypto market. In total, the court dismissed five claims and part of one. Six other claims, however, remain in play. Importantly for Bitfinex, all claims under the Racketeer Influenced and Corrupt Organisations Act (RICO) were dismissed.
The initial complaint was made in 2019 and claimed that the firm had manipulated the crypto market by issuing unbacked USDT “in an effort to signal to the market that there was enormous, organic demand for cryptocommodities”. The argument was that Bitfinex sought to inflate crypto prices “thereby creating and sustaining a ‘bubble’ in the cryptocommodity market”.
Tether took to its website to announce the victory:
With half their case now dismissed, their primary expert debunked, and their lead law firm embroiled in its own internecine war – with its partners and former partners trading allegations of fraud and ethics violations – this case is doomed … Litigation will expose this case for what it is: a clumsy attempt at a money grab, which recklessly harms the whole cryptocurrency ecosystem.
Tether blogpost
Tether – No Stranger to Controversy
Aside from the latest court case, Tether has often made headlines for the wrong reasons. In what has become known as “Tether FUD”, one of the persistent criticisms out there is that USDT artificially props up the crypto market and that its eventual demise will see all of crypto collapse. The argument suggests that USDT isn’t backed by real dollars and that it is simply printed out of thin air. One of the strongest arguments against this is that you can actually redeem USDT for US dollars. Historically, Bitfinex has done itself no favours by refusing to disclose its reserves.
In February, Bitfinex and Tether had a case settled with the Office of the New York Attorney General over mismanagement of USDT reserve funds following civil action by a group of crypto investors. A sum of US$18.5 million was agreed for settling the case in exchange for submitting to periodic reporting of their reserves.
In the following month, Bitfinex confirmed that an independent audit firm had verified that all USDT circulation was fully backed. Even then, the actual reserve composition remained somewhat opaque and, just earlier this month, Bitfinex tried to block an information request from CoinDesk attempting to verify its current reserve composition, citing “harm to its competitive position”.
For now, Tether is out of the woods, but not for long.
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