Plaintiffs Submit Second Amended Complaint in Ongoing Five-Year Class Action Suit Against Tether and Bitfinex

According to the complaint filed on Monday in the Southern District of New York, both companies “executed a sophisticated scheme to fraudulently inflate the price” of Bitcoin (BTC) and other digital assets. They did this by making large and “carefully timed purchases,” which created the illusion of heavy demand and caused a spike in prices.

The spike may have had positive market effects. In general, sentiments within and outside the crypto market are bullish on cryptocurrencies whenever prices increase. The situation usually spikes investments, whale purchases, and general adoption across several sectors, with many merchants more likely to accept cryptocurrency patronage. For instance, Crypto Casino tells us that several cryptocurrency platforms allow people to deposit digital assets, gamble, and attempt to win big like they would at traditional platforms. Players can enjoy more than 200% in bonuses, in addition to support for a wide range of crypto options, including Ether (ETH), BNB, TRX, USDC, XRP, Dogecoin (DOGE), and several others.

Despite the positive effects, an inorganic rise in market prices is detrimental to the industry. According to the lawsuit, the situation resulted in several billion dollars worth of crypto purchases lost because the price action was artificial. In addition to the direct manipulation, Tether allegedly created USDT “out of thin air,” issuing tokens without US dollar backing.

The new complaint is the third one filed in the case, which has now lasted a few years. Plaintiffs argue that Bitfinex and Tether’s actions violated the Sherman Antitrust Act and the Commodities Exchange Act (CEA). However, the case has faced multiple delays since it started in 2019. 

One of these is the exit of crypto law firm Roche Freedman (now Freedman Norman Friedland) as the first counsel to the plaintiffs. Founding partner Kyle Roche filed to withdraw as an attorney for the plaintiffs after whistleblower website Crypto Leaks posted videos allegedly showing Roche bragging about using the law to target crypto companies. The videos showed Roche referring to plaintiffs in class-action lawsuits as “100,000 idiots” and jurors as “10 idiots.” The firm discontinued its representation even though Kyle Roche responded, saying that the videos were “illegally obtained highly edited video clips that are not presented with accurate context.” 

In response to the new complaint, a Tether spokesperson dismissed the amendment as meritless. According to the spokesperson:

“Ultimately, it is the facts and evidence that matters, not the plaintiff’s false and misleading allegations. We remain confident that we will prevail in this litigation, and that plaintiffs’ nonsensical conspiracy theories will be rejected.”

Attorneys representing Bitfinex and Tether have previously tried to prevent amended complaints for a second time following the end of a discovery process. The defendants filed a memorandum opposing the plaintiff’s request for leave to amend their complaint. In the filing, the attorneys describe the motion to amend as an attempt to start over with a “new and previously undisclosed theory of liability.” According to the memorandum, the plaintiffs have not made much headway with their case after two years of more than a million document discovery pages, and several depositions, have not provided enough evidence of market manipulation. The attorneys alleged that the motion to amend was an attempt to create a new motion that conforms to the available evidence.

The Tether and Bitfinex case is one of a few class action lawsuits brought by aggrieved members of the crypto community against several firms, in addition to several other legal steps taken against the sector. For instance, a Massachusetts judge recently denied a motion to dismiss a class action lawsuit against popular gambling company DraftKings. While not a crypto gambling platform, DraftKings sells sports-themed non-fungible tokens (NFTs) on the Polygon blockchain. In March last year, a buyer filed a lawsuit against DraftKings on behalf of other buyers, alleging that the platform’s NFTs meet the requirements of the Howey test. A court agreed that the NFTs possibly meet the securities requirements and may be classified as NFTs.

In June, a judge dismissed four class action claims against Ripple, accusing the company of violating securities laws. Judge Phyllis Hamilton of the US District Court for the Northern District of California dismissed these claims, but allowed one other case to head to trial. Bradley Sostack, who launched a class-action suit in 2018, also filed a suit accusing Ripple CEO Brad Garlinghouse of making misleading statements. Garlinghouse had said in a December 2017 interview that he was “very, very long XRP” and was staying on “the HODL side.” Sostack believes the pronouncements were false because Garlinghouse sold several million XRP that year. According to Ripple’s Chief Legal Officer Stu Alderoty, the company is pleased with the dismissal and is ready to deal with the remaining suit at trial.