Federal Judge Greenlights Class Action Against Tether and Bitfinex Over Alleged Crypto Market Manipulation

U.S. District Judge Katherine Polk Failla approved the class certification motion, splitting plaintiffs into two groups: those who purchased BTC or ETH directly on spot markets, and those who traded cryptocurrency futures contracts. The ruling, which follows a sealed opinion issued February 23, marks a significant procedural win for the plaintiffs and moves the case into the discovery phase — where both sides will be compelled to produce evidence.

Both parties have until March 9 to submit proposed redactions for the public version of that opinion.

What the Lawsuit Actually Claims

At the core of the case is a straightforward but explosive allegation: between 2017 and 2019, Tether issued billions of dollars worth of USDT that was not backed by actual reserves, then funneled those tokens onto exchanges including Bittrex and Poloniex. Plaintiffs argue these funds were deployed in “carefully timed purchases” designed to manufacture artificial demand, prop up prices, and sustain what they describe as a “colossal bubble” — one that ultimately collapsed and wiped out hundreds of billions in investor value.

The 2017 crypto bull run, which saw Bitcoin climb from under $1,000 to nearly $20,000 before crashing, is central to the plaintiffs’ theory of harm. Academic research cited in the filings — most notably work by Griffin and Shams — suggests Bitcoin prices rose systematically following Tether minting events during periods of market weakness. The implication: buying pressure was manufactured, not organic.

Tether and Bitfinex Push Back

The defense isn’t taking the allegations quietly. Bitfinex and Tether have consistently dismissed the lawsuit as a “clumsy attempt at a money grab,” and their legal team has challenged the methodology of the plaintiffs’ expert witnesses as fundamentally unsound. Their broader argument is that the case reflects a basic misunderstanding of how stablecoin issuance actually works.

That said, the companies arrive at this stage with some regulatory baggage. In 2021, Tether and Bitfinex paid $18.5 million to settle claims brought by the New York Attorney General, who alleged the companies misrepresented USDT’s backing and concealed roughly $850 million in losses. As part of that settlement, both entities were barred from operating in New York.

That same year, the Commodity Futures Trading Commission levied an additional $42.5 million fine after finding that Tether had falsely claimed USDT was fully backed by fiat currency. The CFTC’s own review found that Tether held adequate reserves on only about 27.6% of days examined across a 26-month period.

Neither settlement included an admission of wrongdoing — but neither did they help the companies’ credibility heading into this litigation.

The court had already significantly narrowed the case back in late 2021, tossing roughly half of the original claims, including RICO charges. What survived — antitrust violations and commodities fraud — is what plaintiffs are now taking into discovery.

That phase will determine whether the theoretical case built on academic research and prior regulatory findings can hold up against the full weight of evidence. For an industry that has long operated in legal gray zones, the outcome carries implications well beyond Tether and Bitfinex alone.

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