BitFinex and Tether manipulated cryptocurrency prices on a massive scale?

A top law firm from New York - dealing primarily with processes with financial institutions - Roche Freedman LPP claims that giełda kryptowalut BitFinex and stablecoin Tether (USDT) manipulated cryptocurrency prices on a massive scale. Losses resulting from this activity are expected to reach 1,4 trillion USD. The case will end in court.

The Law Firm has just filed a collective complaint with the United States District Court in New York. We can read in it strong accusations, supported by specific calculations, dates and valuations of individual cryptocurrencies. Lawyers write directly that the cryptocurrency exchange BitFinex and stablecoin Tether have been used to deceive individual investors, launch a huge amount of uncovered cryptocurrencies, and induce artificial demand. Effect? Huge increases that investors were supposed to take on. Ended with even faster declines, resulting in a decrease in the value of their wallets, while the defendants had to make a lot of money. Both on cryptocurrency increases and declines, as well as increased turnover itself, caused by increased market volatility.

The full content of the collective complaint
(PDF)

The mechanism of fraud on cryptocurrencies

How, according to New York lawyers, was this scam prepared? The companies were to plan them from the beginning and plan the individual stages of activities well. It would not have been possible without raising huge funds, so most of Bitfinex clients' funds had to be used for it. But that was not enough, hence the idea to issue Tether (USDT) tokens. Apparently nothing new, new cryptocurrencies are popping up like mushrooms, but lawyers from Roche Freedman LPP argue that USDT tokens were not covered in dollars. It is also nothing extraordinary, it is no secret that the largest traditional banks, for example, operate in a similar way. In Poland, the deposit coverage ratio is approx. 2 percent. According to the reasons, however, Tether promised that each token would have dollar coverage, which was supposed to be untrue.

What was the purpose of issuing tokens without large-scale coverage? They were quickly converted into other cryptocurrencies, thus causing more demand waves on the market and rising prices. Lawyers say it was a massive manipulation that caused a bull market on the cryptocurrency market. However, it turned out that the bull market quickly turned into cycles "Boom-and-bust", i.e. the rapid rise and fall in the price of cryptocurrencies, among which Bitcoin was of course the leader. This was supposed to happen in 2017-2018, when we had huge fluctuations in the cryptocurrency market. It was then that Tether issued $ 2,8T. Artificial demand caused an artificial increase in prices, traditionally joined at the top by individual investors who were late and unaware of anything. As the rate started to decline, it was no longer artificially supported and speculators lost their savings. And when someone loses on the market, someone else earns good ...

How much money "evaporated" from the market?

Let's start with the fact that money can appear on the market "from nowhere" - what lawyers from New York accuse, but after conversion to other measures, they certainly do not disappear, but "only" they change owner.

According to preliminary calculations, the BitFinex and Tether cryptocurrency exchanges were to earn about USD 450 billion on this. These are, of course, estimates, because no one knows exactly - at least for now - when and what transactions the companies may have carried out. In total, BitFinex and Tether are accused of causing losses of up to $ 1,4 trillion. Lawyers will probably do anything to prove it in court, because the USA is famous for paying huge compensation to people injured by large companies. They often amount to millions of dollars.

BitFinex exchange for the time being she is very reserved in her response to the lawsuit. Although a statement was issued in which it states that the trial in court is approaching, it merely adds that the accusations are unfounded.