The latest lawsuit about the unstable, multibillion-dollar market for digital currencies comes from a connection between officials of Bitfinex and Tether, who was exposed in the Paradise Papers. In October, in a federal court of New York, the suit was filed in the interest of investors, who have lost their money a year ago, due to the sharp crash in bitcoin’s value.
The #ParadisePapers makes more waves: a massive class action lawsuit alleges that two leading cryptocurrency companies, whose connection was shown in ICIJ's data, conspired to rig the market and fueled last year's bitcoin crashhttps://t.co/6f0NX3Z9Vs
— Sasha Chavkin (@sashachavkin) November 21, 2019
The Paradise Papers lawsuit exposes the two driving officials of Bitfinex, Giancarlo Devasini, and Philip Potter, who were also the beneficial proprietors of Tether. They gave an increasingly secure kind of cryptocurrency, which were called stablecoins that was allegedly supported by USD.
The lawsuit claim asserts that crypto exchange Bitfinex and its sister organization Tether, controlled the crypto market, by manipulating the traders and profiting themselves. Moreover, the suit charges that Tether’s stablecoins were utilized to increase the value of the digital currency on the exchange of Bitfinex. Further, Tether deluded the investors by claiming that stablecoins were completely supported by USD, but in fact, it did not support.
The lead attorney, Kyle Roche, when filing the complaint said,
Right in the height of the bitcoin bubble, the Paradise Papers comes out and shows that Tether and Bitfinex are controlled by the same people. The fact that this overlapping ownership structure was hidden until November 2017 is shocking.
Bitfinex and Tether said that they unveiled their shared proprietorship preceding the Paradise Papers and to keep up that the lawsuit against them is meritless. Also, the organizations contested that Tether’s activities were liable for the 2017 increase in Bitcoin costs.
“It is reckless – and utterly false – to assert that Tether tokens are issued to enable illicit activity,” in an earlier statement, Tether stated on the issue that it shared with ICIJ.
In April 2019, General Letitia James, New York State Attorney, acquired a court order against the organizations, regarding her office’s investigation concerning whether Bitfinex was using funds from Tether subtly to cover the losses.
On April 29, Ms. James said in a statement,
Our investigation has determined that the operators of the ‘Bitfinex’ trading platform, who also control the ‘tether’ virtual currency, have engaged in a cover-up to hide the apparent loss of 850 million dollars of the co-mingled client and corporate funds.
In spite of the April 2017 court filing, the shared proprietorship of Bitfinex and Tether came as a disclosure to the wider public. Moreover, an article published in the New York Times in November 2017 mentioned documents from the Paradise Papers, which gave details that some Bitfinex officials were among the founders of Tether. These documents were in sharp contrast to the company’s claim that their operations were separate.