Bitfinex and Tether have informed the crypto community of a possible lawsuit accusing the two companies of manipulation of the cryptocurrency market.
At the moment, both Tether and Bitfinex are in a legal battle with the New York Attorney General’s (NYAG) office. Notably, on September 24, Bitfinex had a major win when the New York Supreme court denied NYAG’s request to hand over the documents. If lost, the two companies would have been required to turn over the documents appertaining to the use of Tether.
Bitfinex Anticipates An ‘Opportunistic’ And ‘Meritless’ Lawsuit
Per the official statement published on October 5, Tether revealed that an anonymous party was making ‘baseless accusations’ claiming that new tether is minted to manipulate the crypto markets. The company is looking to get ahead of the accusations before the report is officially published:
“Bitfinex is aware of an unpublished and non-peer reviewed paper falsely positing that Tether issuances are responsible for manipulating the cryptocurrency market. Bitfinex vigorously disputes the findings and conclusions claimed by that source, which rely on flawed assumptions, incomplete and cherry-picked data, and faulty methodology.”
Bitfinex also mentioned that it will defend itself accordingly if the lawsuit is filed, maintaining that the plaintiffs are shamelessly out to get a money grab:
“We fully expect mercenary lawyers to use this deeply flawed paper to solicit plaintiffs for an opportunistic lawsuit, which may have been the true motive of the paper all along. In fact, we would not be surprised if such a lawsuit will be filed imminently.”
The Effects Of Tethers On Bitcoin Price
Apart from many people in the crypto industry speculating that Tether somewhat conspires with its sister firm, Bitfinex, others postulate that Tether manipulates the price of bitcoin using USDT. In June 2018, researchers at the University of Texas published a paper suggesting that tether issuance caused immediate surges in the price of bitcoin.
Another recent report by TokenAnalyst noted that when new tether is issued on the blockchain, Bitcoin’s price rises 70% of the time. If issued on the Omni protocol, bitcoin’s price soars half of the time.
USDT, the controversial stable coin, has always claimed to be 100% backed by the US dollar. Critics have, however, long questioned the authenticity of this claim but Tether is yet to produce the results of credible auditing. Yet, in April this year, Tether lawyers opined that tether tokens are backed by only 74% of the company’s reserves. In other words, for each Tether token circulating, the company backs it by only $0.74.
Moreover, following the constant tether minting, the market capitalization of USDT has risen almost ten times from $450 million in July 2017 to $4.1 billion at press time. With this market cap, USDT is the fourth largest in the crypto rankings. Additionally, Bloomberg reported a few days ago that Tether’s daily trading volume had surpassed that of bitcoin.
Nonetheless, Bitfinex concluded its statement, avouching that tether is minted depending on the amount of money provided by clients and not with the aim of manipulating the price of bitcoin:
“Bitfinex 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 and traded on Bitfinex pursuant to market demand, and not for the purpose of controlling the pricing of crypto assets.”