The lawsuit alleging that several top exchanges were instrumental in creating an artificial bull run in 2017 is heating up, and several new exchanges have found themselves caught up in it.
However, the latest big names to be dragged into the legal tussle appear to be Bittrex and Poloniex. In a new amendment, the plaintiffs in the class-action suit have pointed the finger to both exchanges as also playing a role in the market manipulation scheme.
Both Exchanges Facilitated Fake Asset Orders
The entire legal case stems from an accusation that crypto exchange Bitfinex and stablecoin operator Tether Limited, both sister companies, had connived to mint new USTD tokens in 2017. The original suit, which was filed in October 2019, alleged that the two companies overly inflated the USDT tokens’ supply without any proper backing by the dollar.
As they explained, this caused the prices of cryptocurrencies across the board to rise to an all-time high. The plaintiffs, named Matthew Script, Benjamin Leibowitz, Jason Leibowitz, Aaron Leibowitz, and Pinchas Goldshtein, are all Americans who purchased different digital assets between December 2016 and December 2017 – a period when Bitcoin’s price surged by almost 2,500 percent.
However, they also kept hold of their assets and had to endure the market crash. Per the suit, they are now requesting that the Court award the plaintiffs with reasonable costs of litigation, judgment interest payments, and reimbursement of attorney fees.
As for the involvement of Poloniex and Bittrex, the suit alleged that the USDT tokens that Tether Limited issued out of thin air were used to purchase other crypto assets and drive up the value of those assets beyond their fair market value.
The plaintiffs now allege that both exchanges had been in on the scheme, as they helped to facilitate the fake purchase orders across several other exchanges. By doing this, both exchanges were able to create the illusion of fresh liquidity and instigate the market surge.
“With the willing assistance of Bittrex, Inc. (“Bittrex”) and Poloniex LLC (“Poloniex”), two other crypto-exchanges, Bitfinex and Tether used fraudulently issued USDT to make strategically timed, massive purchases of cryptocommodities just when the price of those commodities was falling,” the suit explains.
BitMEX in Trouble Too
Of course, these exchanges aren’t the only ones facing accusations of illegal activities. BitMEX, the industry’s top brokerage and leverage trading platform, has also come under fire for operating illegally and facilitating several crimes.
According to reports, the exchange was sued by BMA LLC with the United States District Court for the Northern District of California. The plaintiff accused HRD Global trading – BitMEX’s parent company – and the exchange’s top executives of engaging in several crimes, including money laundering, racketeering, and wire fraud.
As the lawsuit explains, BitMEX continues to have ties to the United States, even after denying operating in the country. As a matter of fact, they claim that up to 15 percent of the company’s trading volume for 2019 – amounting to about $138 billion – came from U.S. traders.
BMA also accused HRD and BitMEX of conspiring to conduct its operations through several racketeering activities. Other allegations include wire fraud, crypto market manipulation, and fraudulent business dealings. The company criticized BitMEX’s 10x leverage margin trading feature, claiming that its derivatives are calculated based on the process of several illiquid spot exchanges.
The exchange also reportedly allows criminals to operate freely, as they can open accounts under several names and make transactions without any limits.