The lawsuit filed in 2019, which claims 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 U.S. District Court for the Southern District of New York has now ordered stablecoin issuer Tether to produce USDT financial records to assess its claims about the asset’s backing.
Evaluation of USDT support claims
According to the latest order, the New York court has asked the company to provide all information in the form of “general ledgers, balance sheets, income statements, cash flow statements and profit and loss statements.”
Records of crypto and stablecoin transfers by Tether must also be provided at the time of trade execution.
Tether’s motion to block the release of its financial records was rejected by the presiding judge, though lawyers representing the stablecoin firm cited the entire process as “incredibly overblown” and “overburdened.” While stating that the court is not in a position to deny the relevance of the documents, Judge Katherine Polk Failla noted:
“The documents requested in the transaction RFPs appear to go to one of the plaintiffs’ core allegations: that the defendants engaged in crypto commodity transactions using unbacked USDT and that these transactions “were strategically timed to inflate the market”. The plaintiffs raised the relevance of these documents to the defendants and the defendants’ main objection was not the relevance of the documents, but that the requests were overly broad.”
While supporting the request, the judge also stated that the records are important to assess USDT’s USD backing and to allow a forensic accountant to assess the stablecoin’s reserve.
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 hefty $18.5 million settlement with the New York Attorney General (NYAG), claiming the company lied about its reserves and saying USDT is “a stablecoin without stability”.
This was the conclusion of a closely guarded legal dispute that ended with the termination of both Tether and Bitfinex’s trading activity with the New Yorkers.
The fall of the algorithmic stablecoin TerraUSD (UST) earlier this year was catastrophic for the entire crypto industry, but Tether managed to weather the crisis perfectly. Despite regulatory hiccups, as well as the growth of several alternative stablecoins, Tether has grown rapidly over the years, with nearly $70 billion in circulation.
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