USDT Manipulation Case Upgraded! Tether and Bitfinex Collective Lawsuit Approved by New York Court

On February 23, U.S. District Judge Katherine Polk Failla in the Southern District of New York issued a sealed opinion, partially granting the plaintiffs’ motion for class certification in the market manipulation class action against Tether and Bitfinex, while also narrowing the scope of the class. This ruling marks a significant milestone in the lawsuit, which has been ongoing since 2019, entering a substantive trial phase that can proceed in a class action format.

Latest Ruling: What Did the Court Approve and What Was Rejected

Judge Failla’s “partial approval and modification” decision allows the case to proceed as a class action but also limits the scope of the class. The court divided the case into two separate categories, one of which clearly includes: anyone in the United States or its territories who purchased cryptocurrency futures between March 2017 and February 2019, thereby enabling a broader group of affected investors to join the lawsuit.

At the same time, the court also partially denied the defendants’ motion to exclude the plaintiffs’ expert testimony, meaning that key technical evidence presented by the plaintiffs will be preserved and continue to play a role in subsequent proceedings. Gaining class certification fundamentally enhances the bargaining power of the plaintiffs’ group—individual investors often have limited chances of success alone, whereas a class action consolidates a large group of plaintiffs and legal resources, significantly shifting the balance of power.

Core Allegations: How USDT Is Suspected of Market Manipulation

The plaintiffs’ core allegations focus on the market activities of Tether and Bitfinex from 2017 to 2019. The lawsuit claims that the defendants issued USDT without sufficient dollar reserves backing it, using large amounts of “unbacked” stablecoins to purchase Bitcoin, Ethereum, and other cryptocurrencies, artificially creating demand in the market:

• Issuance of USDT without adequate reserves: The plaintiffs allege that the USDT issued was not backed 1:1 by real dollar reserves, effectively creating liquidity out of thin air.

• Artificial price inflation: Large amounts of USDT were used to buy cryptocurrencies at market lows, creating a demand illusion and driving prices higher.

• Investors harmed at market peaks: The artificially inflated market attracted ordinary investors to buy at high prices, who then suffered substantial losses when prices fell back.

• Persistent core allegations: Although some allegations (such as certain RICO conspiracy charges) have been dismissed or adjusted over the years, the core accusations of market manipulation and price rigging have remained central throughout the lawsuit.

Historical Background: From NYAG Settlement to Federal Class Action

Tether and Bitfinex have previously faced investigations by U.S. regulators. In 2021, the two companies settled with the New York Attorney General (NYAG), paying a $18.5 million fine without admitting any wrongdoing, and agreed to exit the New York market. Earlier, the U.S. Commodity Futures Trading Commission (CFTC) also fined Tether and Bitfinex a total of $42.5 million for allegedly making false or misleading statements regarding their reserves.

This federal class action is fundamentally different from those administrative settlements: administrative resolutions are enforcement actions led by regulators, whereas this class action represents harmed investors pursuing damages through a private lawsuit. If the plaintiffs ultimately lose, potential damages could far exceed any previous fines. The case is still ongoing, and both sides are expected to engage in more in-depth evidence discovery and expert debates.

Frequently Asked Questions

Q: What is the substantive significance of class certification for the case outcome?
A: Class certification allows thousands or even tens of thousands of affected investors to file claims collectively, rather than individually. This greatly reduces each investor’s litigation costs and consolidates a large amount of potential damages, significantly strengthening the plaintiffs’ bargaining and litigation leverage. For the defendants, facing collective claims potentially worth hundreds of billions of dollars, settlement pressures will be much higher than in individual lawsuits.

Q: Did the previous settlement between Tether and NYAG affect this federal class action?
A: They are different legal processes. The 2021 NYAG settlement was an administrative enforcement resolution, where Tether and Bitfinex paid $18.5 million without admitting misconduct, resolving NYAG’s investigation. The current federal class action is a civil lawsuit filed by harmed investors, based on different legal theories and standards, with potential damages far exceeding administrative fines. Therefore, they do not constitute a direct legal exemption from each other.

Q: How might the final outcome of the case affect Tether’s USDT?
A: The outcome is highly uncertain, as the case is still in progress. If the plaintiffs win, a substantial damages award could impose significant financial pressure on Tether’s operations and impact market confidence in USDT’s reserves. However, there is still a lengthy legal process ahead, and the defendants have stated they will vigorously defend the case. The final result will depend on the court’s substantive rulings.