Investigating the Tether Lawsuit

The Market Manipulation Legacy of Tether Continues..

Who:

Tether is the product of the company iFinex. This parent company is also the owner of Bitfinex, which acts as one of the primary on ramps for users seeking haven in Tether (USDT). The 156 page lawsuit also accuses other exchanges: Poloniex and Bittrex into the  picture of market manipulation.
Here is a snapshot from their original white paper which provides insight into how the eco system was designed to work. In this scenario, all of the Tether is backed by USD. As we might find out, this might not be the case for how the Tether ecosystem has developed:

What:

Plaintiffs assert that both Poloniex and Bitrrex acted in accordance with Bitfinex to manipulate the market. There was a complex and convoluted scheme to launder and transact Billions of unbacked USDT and offload them onto the market. This would ultimately come at the cost of the consumer, as unbacked Tether decreases the value of all existing Tether.

Here is a  snap shot of how these transactions have been tracked via the publicly accessible ledger. This is one of the benefits of Crypto, complete financial transparency between massive conglomerates, not something you typically see in modern finance era.

When:

Now this is the million dollar question! How long has this market manipulation been going on? It appears that it starts near inception of the Tether project itself. Here is a long term price chart of Bitcoin with an overlay of USDT issuance:

In the hours following transfer of USDT out of the treasury (Bitfinex) and into the affiliate exchanges (Bittrex and Poloniex), the price appreciated greatly. There is a strong correlation between capital gains and volume exchanged between the three when the price goes up.. How about when it goes down? Any seasoned investor would tell you cash is prime for crash, and they would agree! Here is the reverse flow of USDT back into the parent (Bitfinex) from the two operators:

Outcome:

As this court case develops, surely more evidence will come to light. I scanned through the 156 page document and extracted most of the figure you see here. In total there are 12 charges laid against the trio, including fraud, deceptive trade practices, money laundering, bank fraud,.. and the list goes on! Regardless of how it plays out, this allegations leave a very dark mark on Tether, and serve as concrete evidence to their mysterious and possible miss behaviors.  


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