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Daily: Lawsuit against Tether & Bitfinex, Devcon 5 News
DAILY
October 08  |  3 min read

Suit Up

BeQuant Analytics, a daily cryptocurrency market analysis contributor

The market is broadly higher in early European trade, seemingly dismissing the latest reports that a New York-based legal firm has filed a lawsuit against Tether and Bitfinex, accusing them of cryptocurrency market manipulation. Per the report, Kyle Roche & Devin Freedman filed a class-action suit alleging that Tether and Bitfinex have been involved in defrauding investors, manipulating markets and concealing illicit proceeds. Filed on Oct. 6, the complaint document states that the companies primarily accomplished a “sophisticated scheme” that was “part-fraud, part-pump-and-dump, and part-money laundering.” As a reminder, only in September, iFinex, the parent company of stablecoin issuer Tether and cryptocurrency exchange Bitfinex, “won” an appeal against the New York State Attorney General (NYAG). The appellate division of the state’s Supreme Court granted iFinex’s request to stay a previous court order requiring the company to turn over documents to the Attorney General’s office. This announcement, which was paraded as a win by the group, should be taken with a huge grain of salt, because iFinex has until November 4 to “perfect its appeal” according to a court document, or else the company may be required to continue to comply with the investigation. If the case is allowed to proceed, actual arguments won’t likely begin until 2020.

Elsewhere, given the focus on the Ethereum blockchain, especially amid the Devcon 5 event which officially kicked off in Osaka, Japan, it is worth taking a stock of the recent trends in Tether transactions on the blockchain, since it is the second la­­rgest contributor to gas usage after the reported scam Fairwin. Transfer count peaked in early September and has more than halved since then, as has the number of unique senders and receivers, while the transfer amount is also on a declining trend. At the same time, the departure of Fairwin may have released some of the spare capacity. The scale of retraction in gas usage, together with network utilization falling to 64%, highlights the key issue as lack of adoption, not lack of scalability.

On that note, Alan Marquard, chief strategy and development officer at CLS Group, the global utility for settling foreign exchange trades, owned by the 71 largest banks active in that market, claimed that blockchain technology is nice to have, but it’s hardly a must for rewiring the global financial markets. He further added that CLS could have­ opted for “a centralized way of doing the calculations and pushing them back out,” but didn’t do so for a reason, Marquard said. Specifically, the benefit is having the output of the netting calculation on a blockchain so that both participants are definitely getting the same version. This is valuable, particularly with emerging market currencies where there are inefficiencies and potential for trades to break.

Thank you for reading,

The BeQuant’s Analytics team