The lawsuit filed in 2019, which alleges that crypto exchange Bitfinex and its sister company Tether manipulated the crypto market to issue USDT to inflate the price of Bitcoin, has taken a new turn.
The United States District Court for the Southern District of New York has now ordered stablecoin issuer Tether to produce USDT financial records to assess its claims regarding the asset’s backing.
Assessing USDT Support Claims
According to the last orderthe New York court required the company to provide all information in the form of “ledgers, balance sheets, income statements, cash flow statements and profit and loss statements”.
Records regarding crypto and stablecoin transfers by Tether along with the time of transaction execution will also need to be provided.
Tether’s motion to block the publication of its financial records was denied by the presiding judge even as lawyers representing the stablecoin company cited the entire process as “incredibly overblown” and “unduly cumbersome.” While further stating that the court is unable to deny the relevance of the documents, Judge Katherine Polk Failla noted:
“Documents sought in the Transaction Requests for Proposals appear to relate to one of the Plaintiffs’ primary allegations: that the Defendants engaged in crypto commodity transactions using unsecured USDT, and that these transactions” were strategically timed to inflate the market.” Plaintiffs raised the relevance of these documents to Defendants and Defendants’ main objection was not the relevance of the documents, but rather that the claims were too broad.”
While supporting the claim, the judge also said the records are important to assess USDT’s support with the USD and to enable a forensic accountant to assess the reserve of the stablecoin.
Tether’s turbulent past and growth
The market’s reliance on USDT has been a bone of contention for years, and the company behind it has faced increased pressure from regulators, investors, economists, and growing legions of skeptics. In 2021, Tether reached a big settlement of $18.5 million with the New York Attorney General (NYAG), stating that the company lied about its reserves and further calling USDT a “stable coin with no stability”.
It was the conclusion of a closely watched legal dispute that ended with Tether and Bitfinex ending business activity with New Yorkers.
The crash of the algorithmic stablecoin TerraUSD (UST) earlier this year was catastrophic for the entire crypto industry, but Tether managed to weather the crisis rather perfectly. Despite regulatory issues, as well as the growth of several alternative stablecoins, Tether has grown rapidly over the years, with nearly $70 billion in circulation.