Crypto Traders' Lawsuit Claims Bitfinex, Tether Cost Market Over $1 Trillion

Bitfinex and sister company Tether caused more than $1 trillion in damages to the crypto market, a new lawsuit claims.

AccessTimeIconOct 7, 2019 at 2:43 p.m. UTC
Updated Sep 13, 2021 at 11:32 a.m. UTC

A new lawsuit claims crypto exchange Bitfinex and its sister company Tether manipulated the crypto market, harming traders and benefiting themselves.

Bitfinex and a number of affiliated entities engaged in deceptive, anti-competitive and market-manipulating practices, resulting in economic damages for the plaintiffs, according to a lawsuit filed Sunday in New York.

Notably, the plaintiffs, who seek class-action status, claim that the total damages add up to more than $1 trillion, writing:

"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 U.S. dollars."

The lawsuit, filed by David Leibowitz, Benjamin Leibowitz, Jason Leibowitz, Aaron Leibowitz and Pinchas Goldshtein, are represented by Vel Freedman and Kyle Roche – the lawyers who recently won a federal case against Craig Wright. Bitfinex, Tether, Digfinex and current executives; former chief strategy officer Philip Potter; and payment processor Crypto Capital are named as defendants in the case. 

"The crimes committed by Tether, Bitfinex, Crypto Capital, and their executives include Bank Fraud, Money Laundering; Monetary Transactions Derived From Specified Unlawful Activities, Operating an Unlicensed Money Transmitting Business, and Wire Fraud," the filing says.

In the complaint, the plaintiffs further claim Bitfinex and Tether "shared false information about USDT being backed 1:1 by U.S. dollars," referring to an allegation made by the New York Attorney General's office in April. It continues to allege the USDT was used to purchase bitcoin to inflate the crypto market, spurring the 2017-2018 bull market and subsequent bust. 

In a statement sent to CoinDesk after this article was published, David Leibowitz said, "As someone who has been invested in bitcoin and the growth of the cryptocurrency ecosystem, I believe that bad actors in this space have stunted development and consumer confidence."

Market manipulation?

In response to a request for comment, Bitfinex/Tether spokesperson Joe Morgan sent CoinDesk a statement published over the weekend, which stated that the companies expected a lawsuit based on "an unpublished and non-peer reviewed paper falsely positing that Tether issuances are responsible for manipulating the cryptocurrency market."

It went on to add:

"Tether and its affiliates have never used Tether tokens or issuances to manipulate the cryptocurrency market or token pricing. 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. It is irresponsible to suggest that Tether enables illicit activity due to its efficiency, liquidity and wide-scale applicability within the cryptocurrency ecosystem."

In a statement, Roche said, "There was an enormous amount of work put in by the lawyers of our firm, particularly by Joseph Delich, to research the facts related to the conduct outlined in our complaint. I look forward to working with my team as the litigation plays out."

Allegations that Tether has been used to manipulate the cryptocurrency market have circulated for more than a year. In a study published last June, researchers with the University of Texas at Austin said bitcoin’s price rose after the "the Bitfinex exchange use[d] tether to purchase bitcoin when prices are falling."

The U.S. Department of Justice is reportedly looking into the allegations, though it is unclear if the Department has drawn any conclusions at this time.

However, another study published last September by University of Queensland professor Wang Chun Wei found that while "tether grants were potentially timed to follow bitcoin downturns," the actual correlation was "not statistically significant."

Read the full lawsuit:

Tether image via CoinDesk archives

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

Trending

1
CoinDesk - Unknown
Three Arrows Paper Trail Leads to Trading Desk Obscured Via Offshore Entities

As Three Arrows Capital collapsed under market pressure, its much-lesser known trading desk, TPS Capital, remained active, sources say. But a complex ownership structure might frustrate creditors' efforts to collect.

CoinDesk - Unknown
2
CoinDesk - Unknown
June Was Bitcoin’s Worst Month Ever

Plus, European crypto regulation comes into view.

CoinDesk - Unknown
3
CoinDesk - Unknown
What Traders Are Saying About Bitcoin's Biggest Monthly Loss in 11 Years

Poor macroeconomic sentiment, fears of inflation and systemic risks from the crypto market pushed the cryptocurrency below 2017’s highs.

CoinDesk - Unknown
4
CoinDesk - Unknown
Three Arrows Capital Files for Bankruptcy in New York Tied to British Virgin Islands Proceeding

A British Virgin Islands court ordered Three Arrows' BVI branch into liquidation earlier this week.

CoinDesk - Unknown