Our City of London financial services litigation lawyers advise on Bitcoin, Bitfinex, Tether, crypto/digital currency price manipulation claims. We provide cryptocurrency mis-selling representation and use our banking and financial services litigation expertise to ensure we obtain the best possible results and compensation for our clients.
Since 2018, allegations surfaced in cryptocurrency circles that Bitfinex/Tether (USDT) was being used to manipulate Bitcoin prices (BTC). Prosecutors at the US Department of Justice are currently investigation the potential price manipulation of Bitcoin, Ethereum and other cryptocurrencies. From US litigation, we understand that potential manipulation has occurred by traders abusing Tether to influence the price of bitcoin.
If you have used a cryptocurrency exchange such as Bitfinex, Tether, or iFinex you may have a claim for compensation due to market manipulation by these crypto exchanges. Call 02071830529 for a non-obligation chat with one of financial services litigation team.
What is cryptocurrency?
Cryptocurrency is a peer-to-peer version of electronic cash which allows online payments to be sent directly from one party to another without the need to go through a financial institution. There is no such thing as crypto monetary policy. However, a new bill in the US Congress known as the Cryptocurrency Act 2020 will soon be in force allowing the tracing of all transactions and persons trading with the control of cryptocurrencies to fall under financial regulation agencies.
In the UK, there is currently an investigation into extending the FCA’s Regulated Activities Order to cover cryptocurrency.
What is bitcoin?
Bitcoin was the world’s first decentralized cryptocurrency. It is the most popular cryptocurrency. In short, Bitcoin is a ledger that tracks the ownership and transfer of every bitcoin that is in existence. This ledger is known as blockchain.
There are two ways to acquire bitcoin. Either a user can mine it- that is, the Bitcoin protocol issues a user new bitcoin if computer power is expended to update its ledger. Or, a user can receive bitcoin from someone else either by gift or exchange. Cryptocurrency exchanges allow users to trade bitcoin and other cryptocurrencies (such as Ethereum).
What is cryptocurrency price manipulation? How do cryptocurrecny exchanges manipulate Bitcoin prices?
The cryptocurrency market by its very nature as an illiquid market, is an easy target for manipulation given the inherent price volatility, lack of regulation at present and dearth of significant price anchors that comes with institutional capital investments.
In the US, litigators have alleged that Tether has been involved in cryptocurrency manipulation. Tether is essentially a “stablecoin” pegged to the US dollar, that aspires to serve as a bridge between crypto-currency exchanges and conventional currencies.
Tether is the central authority over the cryptoassset known as Tether or “USDT”. Whilst most cryptocurrencies are not backed by a tangible asset, stablecoins such as USDT are attractive to investors because it pegs itself to a tangible asset held in reserve (i.e. the US Dollar). Unlike bitcoin, USDT cannot be mined and instead (and crucially for monopolisation of manipulation) tether unilaterally controls the creation of new USDT.
The key point to note is that Tether claims “that the number of [USDT] tokens in circulation will always equate to the dollars in its bank account”. However, litigators in the US allege that this is a lie. There is evidence to suggest that Tether issued huge amounts of unbacked USDT to manipulate cyrptocurrency prices. Given that the market believed the “lie” that 1 USDT equalled 1 US Dollar:
Bitfinex and Tether had the power to, and did, manipulate the market on an unprecedented scale to profit from boom-and-bust cycles they created. From 2017 through 2018, Tether printed 2.8 billion USDT and used it to flood the Bitfinex exchange and purchase other crypotcurrencies. This artificially inflated demand for cryptocurrencies and caused prices to spike.
US Class Action Litigation case: Leibowitz et al v Ifinex at al (2019)
Anyone who used Bitfinex and Tether from 2017 potentially has a claim. US prosecutors allege that Tether’s mass issuance of USDT “created the largest bubble in human history” with over $450 billion of value disappearing in less than 1 month.
Are Bitfinex and Tether still operating?
Yes. Despite the overwhelming evidence that both companies have inflicted billions of dollars of damage on the cryptocurrency market, both Tether and Bitfinex continue to allegedly defraud the market.
Bitfinex is “the largest and least regulated cryptocurrency exchange in the world”.
There are currently ongoing investigations by the CFTC, the Department of Justice and the New York Attorney General. There are currently two ongoing cases in the US against Bitfinex and Tether.
I have traded through Bitfinex and Tether. Do I have a claim?
The evidence suggests that Bitfinex and Tether individually and collectively had the ability to cause articifcal prices. US Regulators are expected to confirm this conclusion soon. This is likely to lead to a raft of claims both in the US and the UK.
In order to build a case it must be demonstrated that Bitfinex and Tether communicated false information about USDT being backed 1:1 and you have suffered actual damages due to artificial pricing to which you would not have been subject but for the unlawful conduct of the market manipulators.
City of London Cryptocurrency Manipulation Lawyers
Our Financial Services Litigation team of Solicitors and Barristers in London are highly experienced in this area of banking litigation and have acted on manipulation and mis-selling claims against major financial instituions. The cryptocurrency market is highly unregulated, however, it is a misapprehension to believe that you no recoruce to litigation when things go wrong and you have been mis-sold a volatile asset.
Our high profile and high value cases regularly appear in the national and international media. Our banking litigators advise on the protection of borrower legal rights in the face of predatory bank practices. We have successfully managed and settled court litigation against all major UK banks.
Call us on 02071830529 or complete our online contact form.