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New lawsuit accuses Bitfinex, Tether of participating in part-fraud, part money laundering schemes

On 7 October, Roche Freedman, the New York-based high-stakes legal firm, dragged Tether and Bitfinex to court, alleging them to be participants in market manipulation. A class-action lawsuit was filed by Roche Freedman LLP against Tether and Bitfinex for manipulating cryptocurrency markets. The document filed stated that the “part-fraud, part-pump-and-dump and part-money laundering scheme” was accomplished through – Bitfinex and Tether. The lawsuit additionally alleged,

“Their liability to the putative class likely surpasses $1.4 trillion U.S. dollars.”

The Founding Partner of the firm, Kyle Roche, took to Twitter to share the news,

The official lawsuit accused Tether and Bitfinex of carrying out a “sophisticated scheme” for defrauding investors, manipulating markets, and concealing illicit proceeds. Going against the decentralized nature of the crypto-ecosystem, the lawsuit also claimed that Bitfinex and Tether “concealed their extensive cooperation in a way that enabled them to manipulate the cryptocurrency market part-fraud, part-pump-and-dump, and part-money laundering.”

The document alleged that Tether artificially inflated demand by printing (unbacked) 2.8 billion USDT, creating “the largest bubble in human history.” It further highlighted,

“When it burst, over $450 billion of value disappeared in less than a month. The fallout continues to affect the cryptocurrency market, including by causing prices to be lower than they would have been but for the manipulation.”

The lawsuit filed also raised questions regarding the backing of Tether. It stated,

“At the heart of this scheme was Tether’s claim “that the number of [USDT] tokens in circulation will always equate to the dollars in its bank account.” This claim enabled Bitfinex and Tether to signal to the market that there was rapidly growing demand for cryptocurrencies because each USDT printed represented another U.S. dollar invested into the market.”

Interestingly enough, Tether and Bitfinex had publicly admitted on 5 October about the possibility of being sued. The statement said that the two companies expected “meritless and mercenary lawsuit based on Bogus Study.”

In response to Bitfinex and Tether’s statement, the lawsuit stated,

“Bitfinex and Tether published statements where they generally described the allegations contained herein, admitted that they “fully expect” to be sued, and stated that they “would not be surprised if just such a lawsuit will be filed imminently.”

According to the lawsuit filed by Roche Freedman LLP, the two companies’ response was made only after being “fully aware of the incredible harm they’ve inflicted on the cryptocurrency market.”

The plaintiffs named in the lawsuit include David Leibowitz, Benjamin Leibowitz, Jason Leibowitz, Aaron Leibowitz, and Pinchas Goldshtein individually, and on behalf of all others. This action was filed against iFinex Inc., BFXNA Inc., BFXWW Inc., Tether Holdings Limited, Tether Operations Limited, Tether Limited, Tether International Limited, DigFinex Inc., Philip G. Potter, Giancarlo Devasini, Ludovicus Jan van der Velde, Reginald Fowler, Crypto Capital Corp., and Global Trade Solutions AG.



Over $300 million Tether (USDT) Burnt at Tron, is this a clear Sell Signal?

Tether Limited, the company behind the dollar-linked stable coin Tether (USDT), has announced on Twitter that it has destroyed $300 million USDT.

The stable coin plays a crucial role, acting as a conduit for traders to get in and out of the crypto markets.

Tether Limited could be Cashing out

By burning $300 million, it appears as if the company is cashing out

At the time of press, there are over $4.1 billion USDT in circulation.

Tether USDT Market Cap and Supply
Tether USDT Market Cap and Supply

Coincidentally, this surprise coin burning is when BTC prices are shaky, dropping considerably on the last trading day.Advertisement

But it isn’t Bitcoin alone. The crypto market is weak and leading tokens have posted near double digit losses after posting impressive gains in the past two trading months.

Is this the end of Bitcoin and Crypto Rally?

Tether Limited decision has sparked fears of further down trend. Usually, when USDT prices are churned from the treasury, it is ideally supposed to be backed one to one with the USD—or any fiat currency or liquid assets.

The more the number of USDT in circulation, the more the confidence from investors, and the higher the likelihood that BTC will edge higher.

When there is the demand for crypto via channels as USDT, trading volumes soar and that consequently lifts prices.

The opposite, given the prevailing sentiment of the masses who are so used to Tether Limited printing money, could signal bears and the end of a three-month rally.

Going forward, this massive liquidation could be a signal of a cooling market and a profit taking as crypto assets drop from late Jan 2020 peaks.

Coin Burn is not a New Phenomenon

This redemption is nothing new in Tether Limited’s history.

Although the company has not satisfactorily convinced critics that every stablecoin is redeemable to a dollar because of the peg, it is common for Tether Limited—which has close ties with Bitfinex, to redeem and burn a huge amount of the stable coin.

However, as of now, it cannot be known for sure whether the exchange—Bitfinex, is cashing out, or whether the $300 million is a request from a collective pool for stable coin redemption.

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Will Tether’s move from $400 million to $4.5 billion help Bitcoin’s rally?

Bitcoin crossed $10,000 on 11 February and since then, the floodgates on bull run speculations have been pushed wide open, with many in the community expecting the king coin to touch new highs this year, especially in light of the upcoming Bitcoin halving.

Keeping the effects of market sentiments and geo-political events aside and focusing more on the fundamental data available, an interesting change of scenario was observed between the current bull run and the bull run of 2017.

Source: CoinmarketCap

According to CoinMarketCap, when Bitcoin rallied back in 2017, Tether‘s market cap was somewhere around $400 million and the market cap rose as Bitcoin surged to close to $20,000. However, today, many in the community speculate that the present bull run (assumed) may have started with Tether’s market surging to around $4.5 billion. The estimated liquidity in the market alone could make a lot of difference in the current market, especially in terms of avoiding the kind of major slippage that surfaced after the surge in December 2017.

However, Tether’s liquidity has been doubted strongly in the past with Bitfinex involved significantly in a controversial situation with the New York Attorney General for a majority of 2019.

News of Chainalysis providing Anti-Money Laundering Compliance Solutions for Tether has been identified as a way to clear’s Tether’s past image. According to Jonathan Levin, CSO, and Co-Founder of Chainlysis,

“By putting proper AML transaction monitoring in place, Tether is demonstrating its commitment to transparency and regulatory compliance, further building trust among its growing user base.”

However, the plot thickens when we talk about Tether’s ‘user base’ in the market.

There is no question about Tether’s popularity in the market with USDT being the most used stablecoin, in spite of many controversies. Tether has been accused of manipulating Bitcoin’s price over the past year and the Chainlysis AML solution for Tether should solve that conundrum, leaving no confusion in the market.

However, an issue seems to arise if we are to consider a report from last year.

In 2019, Tether regularly printed a huge amount of USDT, crossing $500 million from June to July. It was then highlighted that such aggressive printing was due to Chain-Swap, with USDT demand also increasing on the Ethereum blockchain during the shift from OMNI.

However, according to the founder of the Ethfinex exchange, the printing of Tether was not exactly random.

Will Harborne, the founder of Ethfinex exchange which is a subsidiary of Bitfinex, had stated that when a larger “Tether print” takes place, it means that a bunch of wealthy clients has pre-ordered batches of USDT in advance before the surge takes place in the market. Tether is useful for such large holders as they are then able to purchase Bitcoin, Litecoin, and other crypto-assets on other high-liquid exchanges.

This mode of communication is apparently pre-formed between the Tether and its investors and hence the investors’ demands are often released into large batches.

However, the catch here is the fact that Harbornerefused to disclose Tether’s investors. He had suggested that Tether’s biggest customers are OTC traders who privately sell large quantities to investors or large scale traders. The fact that Tether had such a pact with their ‘investors’ raised manipulation concerns that were later highlighted by the anonymous blogger – Bitfinex’ed. During the NYAG and Bitfinex fiasco, Tether failed to disclose the buy orders from its customers. Bitifinex’ed had then stated,

“Bitfinex would have been able to provide that documentation and avoid a lawsuit. They would have been able to show, here, we issued 10,000,000 tethers to Mr.X, and here’s a 10,000,000 wire transfer from Mr.X just before we issued it.”

Hence, such allegations from the past indirectly suggest that the current tracking of ‘high risk’ transactions for AML compliance may hold less value as the user’s information may still not be released. In a filing from 13 December, lawyers from Bitfinex had claimed that the NYAG does not have the authority to investigate the companies because “tethers are not securities or commodities.”

Will Tether’s increase in market cap over the years from $400mn to $4.5bn and a massive liquidity pool free it from the rumors of market manipulation? Maybe, maybe not. However, while Tether has strategically improved its public image via multiple partnerships, the allegations still remain. With the anticipated bull run and a simultaneous increase in USDT’s market cap, things will be still tense for Tether. Only time will unfold what is yet to happen.

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The Rundown

  • Tether Partners with Chainalysis
  • Regulators Want Greater Crypto Transactions Policing

Stablecoin giant Tether (USDT) is the latest crypto firm to adopt anti-money laundering (AML) tracking solutions from blockchain forensics firm Chainalysis.


Chainalysis announced the news of the deployment in a press release issued on Wednesday (February 12, 2020). According to the press statement, Tether will roll out the Chainalysis Know Your Transaction (KYT) tool as part of its drive towards greater AML compliance.

Now the Tether platform can monitor the stablecoin’s usage across its blockchain, enabling the real-time tracking of suspicious transactions.

With the Chainalysis KYT tool, Tether hopes to gain full-cycle monitoring capability of its stablecoin tokens from the moment of issuance to the point of redemption. The KYT tool can also potentially provide data on the risk profile of USDT token holders.

Thus, Tether will be able to monitor suspicious USDT movements across the different blockchain platforms that support the stablecoin. Commenting on the development, Tether’s chief technology officer Paolo Ardoino remarked:10 BTC & 20,000 Free Spins for every player in mBitcasino’s Winter Cryptoland Adventure!

Working with Chainalysis has allowed us to enhance our AML processes for all transactions involving the Tether token. This solution allows us to ensure a secure compliance program that fosters trust with regulators, law enforcement agencies and users.

With transaction monitoring tools often comes the possibility of user-privacy violations. According to Ardoino, Tether’s drive to ensure robust AML compliance will not come at the expense of exposing vital user information.

Tether has been subject to a lot of controversy with authorities in the U.S. accusing the company and its partner Bitfinex of an $850 million cover-up. Despite these legal troubles, USDT is still the largest stablecoin in the market with a total market capitalization north of $4.6 billion as at press time.


Tether’s plan to use the Chainalysis KYT tool comes as regulators in different countries are announcing plans to ensure stricter crypto money laundering policing. Already, several crypto exchanges have tapped Chainalysis as part of their plans to ensure greater AML compliance while preserving user privacy.

In the U.S., the proposed 2021 budget sees the Secret Service receiving $2.4 billion in funding to among other things, monitor the use of cryptocurrency in money laundering and terrorist financing. The UK’s FCA is also keeping a close watch on crypto-related money laundering as well.

Crypto exchanges in the European Union (EU) are also expecting greater AML demands with the adoption of the fifth anti-money laundering directive (AMLD5).

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