Tether, a leading stablecoin issuer, has just been hit with a serious class-action lawsuit. The complaint, which was filed in the district court of South New York, alleges the issue being the company’s “immoral, unethical, oppressive, and unscrupulous,” which all put together doesn’t paint a very good picture for the company.
Plaintiff’s Matthew Anderson and Shawn Dolika fight the claim made by Tether, that its crypto is backed up by 1:1 dollar reserves. Already challenged twice this year, the plaintiff’s case makes reference of the firm’s shady legal history.
Of course, Tether was rather quick to fire back against said claims on Monday, stating that “shameless money grabs, for which this lawsuit is a textbook example, will never be dignified by way of paying one Satoshi in a settlement.”
One Satoshi here being the most minimal unit account of the cryptocurrency Bitcoin, which stands equal to 0.00000001 Bitcoin, or in dollars, $0.000477 today.
The firm also mentioned it’d “aggressively litigate and dispense” with the filing, and seek to pursue recompense from Anderson and Dolika.
Tether has been knee-deep in some legal issues for some time, now. Back in February, NY Attorney General Letitia James ordered Tether and crypto exchange Bitfinex, a sister company that had common shareholders and management, to stop their trading in New York, and pay a total of $18.5 million after the conclusion of state investigations regarding Tether not having sufficient reserves to back up the number of their Tether USDT tokens in circulation.
Then, in October 2021, both companies got tangled up in even more bad press when independent U.S. derivatives regulator, the Commodity Futures Trading Commission, or the CFTC, issued a fine against Tether for a sum total of $41 million. Bitfinex received a fine of $1.5 million.
The CFTC allegedly stated that Tether held only sufficient fiat reserves in its accounts to back the number of Tether tokens in circulation for just over a quarter of the time, and this was over a 26-month period between the years of 2016 to 2018.
A mere 4 days after the incident with the CFTC, Alex Mashinsky, CEO of Celsius, informed Financial Times about Tether occasionally issuing its dollar-pegged crypto as a loan to exchange it for crypto like Bitcoin and Ethereum. This contradicts the company’s own terms and principles of stablecoins. Mashinsky further emphasized that stablecoins are destroyed upon repayment, in order to prevent an increase in the circulating supply.
As for Tether, the company most definitely tried to be open with the public in 2021. Back in August, an assurance report conducted by auditor Moore Cayman was released by the company. That report revealed almost half of Tether’s reserves are in commercial paper form and certificates of deposit. Only 10% actually comes from bank and cash deposits.