The stablecoin issuer Tether and cryptocurrency exchange Bitfinex won a major legal battle when Chief Judge Laura Taylor Swain of the United States District Court for the Southern District of New York rejected a class action lawsuit against Tether.

In a lawsuit filed in 2021, plaintiffs Matthew Anderson and Shawn Dolifka claimed that Tether had misrepresented the extent to which the USDT stablecoin it issued was backed by the U.S. dollar.

After finding no “plausible allegations of injury” in the case, a U.S. District Court sided with the USDT issuer.

The fundamental argument made by Anderson and Dolifka was that Tether does not keep the same amount of reserves as USDT coins in circulation.

In addition to U.S. dollars, as Tether had intimated, the class action complaint claimed that the reserves also contained overcollateralized loans and unreported commercial paper.

According to the plaintiffs, these practises lacked transparency and hid the true value of the stablecoin.

Plaintiffs Not Able to Back Claim with Proof

Tether responded that the plaintiffs had not shown any proof that the value of USDT has decreased.

The United States District Court agreed with Tether and pointed out the lack of evidence for the asserted harm in the complaint.

Tether’s Chief Technology Officer Paolo Ardoino backed the court’s judgement on Twitter, noting that the plaintiffs lacked evidence to support their claims of value erosion.

In addition, Ardoino’s obtuse remarks on the recent stablecoin market movements have raised some red flags, suggesting that the market may have been manipulated in an attempt to depeg USDT.

He also made reference to the recent market action involving FDUSD from First Digital, another stablecoin rival.

The Number of USDTs in Circulation Hits a New Record

Tether continues to be the most popular stablecoin despite criticisms about its lack of decentralisation and oversight.

As of this writing, the total value of USDT in circulation is $83.9 billion, giving it a 66.7% share of the market.

The supply of USDC held by Circle, a rival of UDST, is $26 billion (20.7% market share), however it has decreased by 41.5% since the beginning of 2023.

Bitfinex and Tether were fined over $42 million by the Commodity Futures Trading Commission (CFTC) in October 2021 on claims that the USDT stablecoin was not always fully supported.

Over a 26-month period, from 2016 to 2018, Tether’s stablecoin was only fully backed by reserves 25% of the time, according to the financial regulatory agency.

Tether also paid fines for mixing its reserves in non-cash goods with the company’s business money.

The United States Congress is also working on stablecoin rules, with a freshly designed measure having been filed and widely anticipated to pass.

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