Tether Denies Every Accusation Against It – Sinner or Saint?


Tether (USDT) is the world’s number one stablecoin both in terms of daily volume and market cap. It is also the most controversial cryptocurrency within the industry that has been accused of manipulating the market. There have been accusations that target the very basic properties of the stablecoin.

Tether is supposed to be a dollar-pegged cryptocurrency, meaning it is backed by the U.S dollar. An affidavit filed by the Tether’s general counsel Stuart Hoegner shockingly revealed that the stable coin is only 74 per cent backed by cash and other equivalent assets. The company supposedly holds $2.1 billion in cash and short-term securities.

The filing states:

“As of the date [April 30] I am signing this affidavit, Tether has cash and cash equivalents (short term securities) on hand totalling approximately $2.1 billion, representing approximately 74 per cent of the current outstanding tethers.”

Another report by Coin metrics, a crypto market research company based in Massachusetts revealed that the controversial stablecoin was controlled by just 318 unique identifiers or addresses that hold $1 million of the token.

Probably the most controversial allegation was a study published by John Griffin, a finance professor at the University of Texas in Austin, revealed that single account was responsible for driving up the price of Bitcoin (BTC) during the price hike in 2017. The study stated that the purchases with Tether were timed following market downtrends, which resulted in a massive rise in bitcoin prices.

An excerpt from the study states:

“By mapping the blockchains of bitcoin and tether, we are able to establish that entities associated with the Bitfinex exchange use tether to purchase bitcoin when prices are falling. Such price supporting activities are successful, as Bitcoin prices rise following the periods of intervention.”

Amidst these controversies, Tether soon found itself involved in a class-action lawsuit that claims that Tether, along with sister company Bitfinex is responsible for manipulating the crypto market and causing damages that add up to $1 trillion.

The lawsuit comprised of various other allegations that include the one made by New York Attorney General’s office in April who accused Bitfinex and Tether of hiding a loss of $850 million from investors. This case was fuelled by professor Griffin’s study which accused one whale of manipulating the market using Tether.

The lawsuit was filed by David Leibowitz, Benjamin Leibowitz, Jason Leibowitz, Aaron Leibowitz and Pinchas Goldshtein, and they are represented by Vel Freedman and Kyle Roche, the lawyers who recently won a federal case against Craig Wright. The defendants in the case are Bitfinex, Tether, Digfinex and current executives; former chief strategy officer Philip Potter; and payment processor Crypto Capital are named as defendants in the case. The filing states:

“The crimes committed by Tether, Bitfinex, Crypto Capital, and their executives include Bank Fraud, Money Laundering; Monetary Transactions Derived From Specified Unlawful Activities, Operating an Unlicensed Money Transmitting Business, and Wire Fraud.”

The filing also mentioned that the alleged parties “shared false information about USDT being backed 1:1 by U.S. dollars.”

Now, Tether has released a letter of intent which states that it will be filing a motion to dismiss the lawsuits that alleges it of manipulation. The letter claims that the lawsuit has ignored a part of the study where the researchers withdrew one of the prime allegations, which is the trading patterns reveal that the issued Tether was unbacked.

Further down the letter has also dismissed claims of causing any damages to the traders since the plaintiffs couldn’t prove it. It has also refused claims of having a power of monopoly over the stablecoin market, participation in racketeering, and commitment of common law fraud among other allegations.

The letter also claimed that the study published by professor Griffin was “a watered-down and embarrassing walk-back” of the first version. Mentioning claims regarding its reserves, tether pointed towards the transparency section of their website which shows that tether holds $4.5 billion in assets alongside $100 million cushion above its liabilities.

Earlier, when requested to comment, Joe Morgan, Tether/Bitfinex spokesperson said in a statement:

“Tether and its affiliates have never used Tether tokens or issuances to manipulate the cryptocurrency market or token pricing. All Tether tokens are fully backed by reserves and are issued pursuant to market demand, and not for the purpose of controlling the pricing of crypto assets. It is irresponsible to suggest that Tether enables illicit activity due to its efficiency, liquidity and wide-scale applicability within the cryptocurrency ecosystem.”

For now, we have no solid evidence against the USDT issuer, but the number of controversies and allegations against the token is still alarming and hard to ignore. If any of these allegations are proved in court, the minds behind this cryptocurrency will be in an ocean of trouble. Only time will tell if Tether is a victim of false accusations or an instrument of manipulation.

Anna Larsen
Anna Larsen has been a Crypto enthusiast since 2016. Fascinated by the technology and its usecases she decided to pursue a career in content creation related to this space. The journey has been exciting ever since.

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