The companies in charge of the stablecoin cryptocurrency Tether are being sued and accused of “propping and popping the largest bubble in history.” As a result, the plaintiffs say, $265 billion in crypto value simply disappeared.
Bloomberg is reporting that the lawsuit was filed in the U.S. District Court for the Southern District of New York on Sunday (Oct. 6), and that the defendants are accused of manipulating the price of Bitcoin.
Stablecoin is a category of cryptocurrency that’s backed up by fiat currency, and isn’t supposed to be as vulnerable to wide price fluctuations. The owners of Teher run the Bitfinex exchange, and the lawsuit is alleging that because of this they were able to execute unbacked bitcoin by orders for free with unbacked Tether.
Tether was supposed to be backed in a 1:1 ratio with fiat reserves, but earlier this year Tether issuers said there could be other assets used to prop it up. That means that buy orders can inflate prices on the illiquid market.
“Whatever the case might be and however the court might find the outcome, this suit will bring an unprecedented level of transparency to Tether,” said Emin Gun Sirer, an associate professor at Cornell University. “That’s something that almost everyone will agree is a good thing for the whole space.”
Earlier this month, Tether said before the suit was filed that it “anticipates (a) meritless and mercenary lawsuit based on bogus study. Tether and its affiliates have never used Tether tokens or issuances to manipulate the cryptocurrency market or token pricing.”
The defendants in the case are accused of racketeering and knowingly defrauding investors.
Tether has seen accusations of malfeasance before. In April, the Attorney General in New York accused the companies working behind Bitfinex and Tether of losing more than $850 million in money from clients, both independent and corporate.
The defendants in the case are: Tether Operations Ltd, Tether Ltd., Tether International Ltd., DigFinex Inc., Philip G. Potter, Giancarlo Devasini, Ludovicus Jan van der Velde, Reginald Fowler, Crypto Capital Corp., Global Trade Solutions AG, IFinex Inc., BFXNA Inc., BFXWW Inc. and Tether Holdings Ltd.