On November 15, 2019, Tether and cryptocurrency exchange Bitfinex delivered a blistering response to a proposed class-action lawsuit in New York federal court seeking more than $1.4 trillion in damages for alleged manipulation of the Bitcoin market. The companies dismissed the claims as “simply preposterous,” marking the latest escalation in one of the most consequential legal battles in cryptocurrency history.
TL;DR
- Tether and Bitfinex filed a pre-motion letter on November 15, 2019, calling the $1.4 trillion lawsuit “preposterous”
- The lawsuit alleges a “part-fraud, part-pump-and-dump, and part-money laundering” scheme that cost investors $466 billion
- A key academic report at the center of the case was revised to show manipulation by “one large player,” not directly by Bitfinex or Tether
- The case is brought under the Commodity Exchange Act and RICO statutes, with potential triple damages
- Bitcoin was trading around $8,491 on the day of the filing, with Ethereum at $180
The Lawsuit That Shook Crypto
The proposed class-action complaint, filed on October 6, 2019, in the Southern District of New York, represents a group of longtime cryptocurrency investors led by David Leibowitz, Benjamin Leibowitz, Jason Leibowitz, Aaron Leibowitz, and Pinchas Goldshtein. The plaintiffs allege that Bitfinex and Tether engaged in a coordinated scheme to artificially inflate Bitcoin prices during the historic 2017 bull run, which saw BTC surge from under $1,000 to nearly $20,000.
According to the complaint, the alleged “part-fraud, part-pump-and-dump, and part-money laundering” scheme eventually cost cryptocurrency investors a staggering $466 billion between January 6 and February 6, 2018, as the market collapsed from its all-time highs.
The Griffin Report: A Shifting Foundation
Central to the plaintiffs case is an academic paper known as the Griffin report, authored by John Griffin of the University of Texas at Austin and Amin Shams of Ohio State University. The original version, published on the Social Science Research Network (SSRN) in June 2018, concluded that up to half of Bitcoins price gains during the 2017 rally resulted from Tether-driven manipulation.
However, a subsequent update to the report significantly revised its conclusions. The updated version indicated that manipulation was carried out by “one large player” in the market, rather than directly by Bitfinex or Tether as had been previously alleged. Tether and Bitfinex seized on this revision in their defense, arguing it undermined the very foundation of the complaint.
Jim Walden, managing partner at Walden Macht and Haran LLP, who represents Bitfinex and Tether, expressed bewilderment at the lawsuits reliance on the academic report. “I cant understand the motivation of plaintiffs lawyers to rely on an unpublished non-peer-reviewed academic report as the basis for such a serious lawsuit,” Walden told Law360.
Plaintiffs Push Back
Kyle W. Roche of Roche Freedman LLP, representing the investors, countered that the updated report actually strengthened their case. “The analysis now shows that one player was primarily responsible for manipulating Bitcoin markets, and Professor Griffin recently told the Wall Street Journal that if its not Bitfinex, its somebody they do business with frequently — e.g., Tether,” Roche stated.
The complaint brings causes of action under both the Commodity Exchange Act and the Racketeer Influenced and Corrupt Organizations Act (RICO). Under RICO and antitrust provisions, damages could be tripled, bringing the potential liability to over $1.4 trillion — a figure that dwarfs the entire cryptocurrency market capitalization at the time.
The Tether-Bitfinex Connection
The case also shines a spotlight on the complex relationship between Tether and Bitfinex. The two entities share personnel and have overlapping ownership through parent company iFinex Inc., which is also named in the suit. Tether, the issuer of the USDT stablecoin pegged to the US dollar, has long faced scrutiny over whether its token issuances were fully backed by dollar reserves and whether USDT was used to prop up Bitcoin prices during periods of market stress.
At the time of the filing, Bitcoin was trading at approximately $8,491, while Ethereum sat at $180.52. XRP traded at $0.26, and the broader crypto market had been experiencing a prolonged bear market since the peak of late 2017, with total market capitalization having shrunk dramatically from its January 2018 highs.
Why This Matters
The $1.4 trillion Tether lawsuit represents one of the most significant legal challenges the cryptocurrency industry has ever faced. At its core, the case raises fundamental questions about market integrity in crypto: were the parabolic gains of 2017 organic demand or artificially manufactured through unbacked stablecoin issuance? The outcome of this litigation would have profound implications for how stablecoins are regulated and whether crypto exchanges can be held liable for market manipulation. With the case filed under RICO statutes — typically reserved for organized crime — it signaled that traditional legal frameworks were being aggressively applied to the nascent crypto industry. For everyday investors who watched their portfolios evaporate in the 2018 crash, this lawsuit was a bid for accountability in a market that often seemed to operate without rules.
Disclaimer: This article is for informational purposes only and does not constitute financial or legal advice. Past market events do not predict future performance. Always conduct your own research before making investment decisions.
$1.4 trillion in damages from a company whose entire market cap is a fraction of that. the lawyers are just fishing for a settlement here
mtgox_veteran_ tether market cap was like 4B in 2019 and they sued for 1.4T. the lawyers were just hoping for a nuisance settlement
The academic revision is actually huge here. If the report changed to say manipulation was by one large player and not directly Tether, thats a massive hole in the plaintiffs case
RICO and triple damages tho. even a small chance of losing that is existential for tether
Anca D. exactly. the revision to one large player basically admitted the original research couldnt pin it on Tether directly. plaintiffs never recovered from that
the academic revision completely undermines the plaintiff argument. you cant claim tether manipulated markets when your own expert says it was one large player
usdt_watcher the revision saying ‘one large player’ not tether specifically basically killed the whole plaintiff case. but somehow this dragged on for years anyway
Anca D. the revision to one large player was the whole ballgame. without directly implicating tether the plaintiff case was always thin
crazy to see btc at $8,491 in this context. if you told someone then itd be 100k five years later theyd think you were the one manipulating markets
BTC at $8,491 and people were already talking about manipulation at scale. imagine what theyd say about todays market
RICO and triple damages on a stablecoin company in 2019 was the lawyers going nuclear. BTC at 8491 and theyre claiming 1.4 trillion in damages. absurd
RICO charges for a stablecoin issuer in 2019 was absolutely unhinged. glad the courts had more sense than the plaintiffs
funny how the $1.4T number was basically the entire crypto market cap at one point. they sued for everything
Jin W. sued for more than the entire market cap of crypto at the time. class action lawyers really just threw a dart at a board with zeroes on it