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New lawsuit accuses Bitfinex, Tether of participating in part-fraud, part money laundering schemes

Arijit Sarkar

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On 7 October, Roche Freedman, the New York-based high-stakes legal firm, dragged Tether and Bitfinex to court, alleging them to be participants in market manipulation. A class-action lawsuit was filed by Roche Freedman LLP against Tether and Bitfinex for manipulating cryptocurrency markets. The document filed stated that the “part-fraud, part-pump-and-dump and part-money laundering scheme” was accomplished through – Bitfinex and Tether. The lawsuit additionally alleged,

“Their liability to the putative class likely surpasses $1.4 trillion U.S. dollars.”

The Founding Partner of the firm, Kyle Roche, took to Twitter to share the news,

The official lawsuit accused Tether and Bitfinex of carrying out a “sophisticated scheme” for defrauding investors, manipulating markets, and concealing illicit proceeds. Going against the decentralized nature of the crypto-ecosystem, the lawsuit also claimed that Bitfinex and Tether “concealed their extensive cooperation in a way that enabled them to manipulate the cryptocurrency market part-fraud, part-pump-and-dump, and part-money laundering.”

The document alleged that Tether artificially inflated demand by printing (unbacked) 2.8 billion USDT, creating “the largest bubble in human history.” It further highlighted,

“When it burst, over $450 billion of value disappeared in less than a month. The fallout continues to affect the cryptocurrency market, including by causing prices to be lower than they would have been but for the manipulation.”

The lawsuit filed also raised questions regarding the backing of Tether. It stated,

“At the heart of this scheme was Tether’s claim “that the number of [USDT] tokens in circulation will always equate to the dollars in its bank account.” This claim enabled Bitfinex and Tether to signal to the market that there was rapidly growing demand for cryptocurrencies because each USDT printed represented another U.S. dollar invested into the market.”

Interestingly enough, Tether and Bitfinex had publicly admitted on 5 October about the possibility of being sued. The statement said that the two companies expected “meritless and mercenary lawsuit based on Bogus Study.”

In response to Bitfinex and Tether’s statement, the lawsuit stated,

“Bitfinex and Tether published statements where they generally described the allegations contained herein, admitted that they “fully expect” to be sued, and stated that they “would not be surprised if just such a lawsuit will be filed imminently.”

According to the lawsuit filed by Roche Freedman LLP, the two companies’ response was made only after being “fully aware of the incredible harm they’ve inflicted on the cryptocurrency market.”

The plaintiffs named in the lawsuit include David Leibowitz, Benjamin Leibowitz, Jason Leibowitz, Aaron Leibowitz, and Pinchas Goldshtein individually, and on behalf of all others. This action was filed against iFinex Inc., BFXNA Inc., BFXWW Inc., Tether Holdings Limited, Tether Operations Limited, Tether Limited, Tether International Limited, DigFinex Inc., Philip G. Potter, Giancarlo Devasini, Ludovicus Jan van der Velde, Reginald Fowler, Crypto Capital Corp., and Global Trade Solutions AG.

Arijit is a full-time journalist at AMBCrypto, who focuses on the XRP and Ethereum ecosystem. Leveraging over three years of experience in media and Majoring in Computer Science, he covers the technical developments in the crypto ecosystem