Piecing Together the Class Action Lawsuit Against Bitfinex and Tether

Just two days ago, Bitfinex announced they foresee a “meritless” lawsuit coming their way based on a study that has inconsistent assumptions and skewed findings. About a day later, it was revealed that several individuals have taken iFinex to court claiming that, with Tether, they single-handedly manipulated the entire cryptocurrency market, October 7, 2019.

Wild Claims and No Evidence

Everybody who has been in this space long enough knows that Bitfinex and Tether aren’t exactly the most revered organizations. But to claim that Tether alone was responsible for the entire 2017 bull run and the subsequent crash is lazy and naive.

Court documents show that each of the five plaintiffs had different cryptocurrency holdings. And since one of them held EOS, which only launched its ICO on June 25, 2017, it means this is the absolute beginning of the time frame.

These plaintiffs held a wide range of cryptocurrencies; one of them invested in 24 different cryptocurrencies. Just to lay this out in an easier way, this particular plaintiff bought bitcoin, ether, and 22 other cryptocurrencies in the middle of the bull run and is blaming the fallout on Bitfinex and Tether. The kids on Twitter call this “bagholder syndrome”.

The most amusing part of this lawsuit is that, for once, Bitfinex is actually in the right. John Griffin and Amin Sham’s paper that concluded that Tether manipulated the market was very easily torn apart by macro investor Alex Krüger. The first rule of statistical studies is that correlation doesn’t equal causation, yet these academics are unable to integrate this basic tenet into their research.

Different Context, Different Story

Visualize this scenario with the traditional financial market. Somebody files a lawsuit against J.P. Morgan Chase for pushing too much liquidity into the hands of borrowers and causing the price of Apple shares to bubble up and fall down. Yes, there is a correlation between Chase pushing more liquidity into the economy and Apple shares going up, but does this mean that that it caused the rise in share price?

Nobody would dare file a lawsuit like this because it sounds downright ridiculous. While Tether and Bitfinex aren’t saints, blaming them for manipulating an entire market is beyond a stretch.

In cryptocurrency, everything seems to be crazy and lawsuits run haywire. After a thorough read of the main complaint, it is difficult to see this as anything but some opportune folks looking to milk a situation for all it’s worth.