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Tether Denies Accusations of Manipulating Crypto Market Using USDT
November 08  |  3 min read

Tether Discredits Research Claiming It Manipulated Crypto Market in 2017

The COIN360 Editorial Team

Tether, the company behind dollar-backed stablecoin USDT, issued a response to an updated research paper soon to be published that states the 2017 BTC all-time high was a product of manipulation by a single whale operating via Tether’s sister company Bitfinex.

The paper, written by a professor of finance at the University of Texas John Griffin, and Amin Shams, Assistant Professor of Finance at the Ohio State University, was first published last year and it has been updated by the two professors who concluded that bitcoin reaching $20,000 at the end of 2017 was reportedly the product of a single whale acting alone via Bitfinex in a series of transactions that involved Tether coins.

On Nov. 7 Tether and Bitfinex published a statement in response to the paper claiming the companies were involved in the aforementioned market manipulation, which is referred to as a “weakened yet equally flawed version of their prior article.” The stablecoin issuer went on to say that the authors “openly admit they do not have accurate data on the crucial timing of transactions or the flow of capital across different exchanges,” meaning they are unable to identify a valid sequence of events that could have led to the alleged manipulation.

Furthermore, the original paper stated that some patterns of trading the academics observed were linked to the issuance of unbacked USDT coins. In the updated version, however, Griffin and Shams admit that those patterns could be consistent with the market purchase of Tethers instead.

Throughout the years, Tether has avoided an audit that would prove it has sufficient funds to back all their USDT tokens. In Dec. 2017, the U.S. Commodity Futures Trading Commission (CFTC) subpoenaed Tether and Bitfinex under suspicions of fraud and in June 2018 Tether released a transparency report that claimed the company possessed sufficient funds to back their tokens. However, an audit was never performed.

The statement released by Tether mentions that “all Tether tokens are fully backed by reserves and are issued pursuant to market demand,” and that the paper’s authors don’t display any data that disputes that fact. Additionally, Tether stated that neither the company or its affiliates have ever used USDT tokens or issuances “to manipulate the cryptocurrency market or token pricing.”

In October, Tether and Bitfinex were sued based on the original paper released last year. The lawsuit was filed by Devin Freedman and Kyle Roche, who had successfully sued Craig Wright, and claimed that both companies were using USDT to manipulate the crypto market.

Earlier this year in April, the New York Attorney General (NYAG) Letitia James filed a lawsuit against Tether, Bitfinex, and their parent company IFinex for allegedly using USDT reserves to cover up a more than $850M loss on the Bitfinex exchange, as well as having several New York-based traders illegally transacting on the exchange.