Tether and Bitfinex celebrated a notable legal triumph as Chief Judge Laura Taylor Swain from the U.S. District Court for the Southern District of New York dismissed a collective lawsuit leveled against the issuer of the stablecoin.
The legal action initiated by Matthew Anderson and Shawn Dolifka in 2021 argued that Tether’s assertions about its stablecoin, USDT, being backed on a one-to-one basis by the U.S. dollar were unfounded.
Nonetheless, the U.S District court has ruled in favor of Tether, the entity issuing USDT, due to a lack of credible claims of damages in the filed complaint.
The crux of the dispute by Anderson and Dolifka was predicated on their belief that Tether didn’t hold reserves equivalent to the number of USDT tokens in circulation.
In addition, the class-action lawsuit posited that these reserves weren’t exclusively made up of U.S. dollars, contrary to what Tether suggested, but also included a concoction of over-collateralized loans and unrevealed commercial paper.
The plaintiffs argued that these activities distorted the true value of the stablecoin.
Insufficient Proof from Plaintiffs
In its rebuttal, Tether asserted that the plaintiffs had not produced any solid evidence to indicate a decreased value of USDT.
The U.S District court sided with Tether, noting that the complaint was missing factual backing for the claimed damages.
Paolo Ardoino, CTO of Tether, voiced his endorsement of the court’s ruling on Twitter, emphasizing that the plaintiffs were unable to provide proof for their claims of value reduction.
Ardoino additionally stirred up speculations regarding recent stablecoin market trends with his veiled comments, suggesting possible market manipulation intended to destabilize USDT.
He also brought up First Digital’s newly introduced stablecoin, FDUSD, associating it with the market dynamics.
USDT’s Circulation Reaches All-Time High
Despite ongoing claims of insufficient decentralization and governance, Tether continues to hold its leading position in the stablecoin market.
As of this writing, the circulation of USDT has reached a record peak of $83.9 billion, thereby securing a dominant market share of 66.7%.
Contrastingly, Circle’s USDC, a competitor of USDT, has a circulation of $26 billion, making up a 20.7% market share, although its supply has experienced a 41.5% decrease since the onset of 2023.
In October 2021, Bitfinex and Tether were hit with over $42 million in fines by the Commodity Futures Trading Commission (CFTC) based on accusations that the USDT stablecoin was not fully backed at all moments.
The financial oversight authority discovered that Tether’s stablecoin was fully backed by reserves only a quarter of the time during a span of 26 months from 2016 to 2018.
Tether also reached a settlement on charges related to the mingling of reserve funds with the firm’s corporate funds, as well as holding reserves in non-cash products.
Additionally, the US government is in the process of developing stablecoin regulations, with lawmakers recently suggesting a freshly written bill that is anticipated to pass through the legislature smoothly.
