Stablecoin firm Tether and its affiliate exchange Bitfinex anticipate a lawsuit alleging that Tether token (USDT) is involved in market manipulation as the result of an unpublished paper.
Tether and Bitfinex to defend its position
On Oct. 5, both Tether and Bitfinex published statements claiming that they had become aware of an unreleased paper “falsely positing that Tether issuances are responsible for manipulating the cryptocurrency market.”
Both firms argued that findings and conclusions claimed by that unpublished source relies on “flawed assumptions, incomplete and cherry-picked data, and faulty methodology.” Both announcements likewise refer to the paper as “non-peer reviewed.”
Tether and Bitfinex further wrote that they do not only expect unethical lawyers to use the paper to launch a lawsuit, but also they would not be surprised if just such a lawsuit were to be filed soon. As such, both firms said that they will vigorously defend themselves in any such action.
In its post, Bitfinex wrote:
“These baseless accusations are an attempt to undermine the growth and success of the entire digital token community, of which Bitfinex and Tether are key parts. It is an attack on the work and dedication of not just Bitfinex’s stakeholders, but thousands of our colleagues, too.”
Tether is fully backed by reserves
The companies further outlined certain concepts of their business, claiming that neither Tether or their affiliates ever 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.”
Controversial history of Bitfinex Market Manipulation
Meanwhile, Tether is known as a controversial topic in the crypto community, largely based on skepticism over Tether’s reserve policy. Launched in 2014, Tether is the first-ever stablecoin to be backed by the United States dollar at 1:1 ratio. For the past two years, industry critics have speculated that Tether did not have the necessary cash reserves in its bank accounts to back the amount of USDT in circulation.
As reported, Tether has had an association with Bitfinex since 2015, when the exchange integrated the crypto operation into its exchange.
While Tether has frequently attempted to prove that its token is backed by the appropriate amount of dollar holding, the controversial reports against the firm have continued to appear. As such, in August 2019, research by Augmento pointed out a forward d correlation between Tether sentiment, market capitalization and price, which could be manipulated or exploited to create arbitrage.
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