Crypto Scam Relied On 'Shadow Processor', $1.4trn Lawsuit Alleges

  • Crypto Scam Relied On 'Shadow Processor', $1.4trn Lawsuit Alleges

Crypto Scam Relied On 'Shadow Processor', $1.4trn Lawsuit Alleges

Like a crashing rocket, the crypto community was dealt a big blow earlier in the week when news surfaced of an ongoing class action lawsuit, which claims that the renowned crypto firm (alongside its affiliated company Bitfinex) is holding the key to what could pass as the biggest cryptocurrency bubble of all times.

Roche Freedman filed a class-action suit alleging that the stablecoin firm and affiliated crypto exchange have been involved in defrauding investors, manipulating markets and concealing illicit proceeds, the firm's founding partner Kyle Roche tweeted on October 7. The plaintiff claims the defendant's actions amounted to over $1.4 trillion Dollars in losses.

Conclusively, Roche Freedman noted that calculating damages caused by the manipulative scheme at this stage is premature even though the liability likely surpass $1.4 trillion.

According to the, Tether minted 2.8 billion USDT from 2017 to 2018 and used the token to "flood the Bitfinex exchange and purchase other cryptocurrencies".

The complaint further mentions that the companies' "liability to the putative class likely surpasses $1.4 trillion US dollars".

Specifically, Counts I, II, and III of the Complaint accused market manipulation, violating the Commodities Exchange Act. Count VI claims fraud against the defendants and Count VII statutory violation of NY trade practices law. They are represented as legal entities by Roche Freedman, known for its victory in the Craig Wright case.

Tether is the issuer of the tether stablecoin, which until recently billed itself as being backed "one-to-one" by dollars in an offshore bank account.

Citing a study published previous year by the University of Texas, the lawsuit categorically stated that Tether Limited teamed up with Bitfinex to manipulate the prices of Bitcoin (BTC)trade and other virtual assets by artificially creating "as much as half the growth in the cryptocurrency market".

Meanwhile, in his daily commentary, Mati Greenspan, Senior Market Analyst at eToro, stressed that in major financial institutions across the globe, the process of creating unbacked currency for the objective of purchasing financial assets and propping-up market prices is simply known as common practice. "It is irresponsible to suggest that Tether enables illicit activity due to its efficiency, liquidity and wide-scale applicability within the cryptocurrency ecosystem", he continued.