Class Action Dismissed by Court

The world’s largest stablecoin issuer Tether has lauded a legal victory as a U.S. District Court dismisses a class action lawsuit regarding its reserves. The case stems from a complaint filed back in 2021 questioning the legitimacy of Tether reserve statements.

On Aug. 4, Chief Judge Laura Taylor Swain of the U.S. District Court for the Southern District Of New York issued an order dismissing the class action lawsuit.

Tether’s Court Victory

Matthew Anderson and Shawn Dolifka filed the suit against Tether and Bitfinex in 2021. Furthermore, they claimed that Tether falsely stated that USDT was backed one to one by the US dollar.

“Defendants did not maintain the same amount of reserves as Tether tokens in circulation,” the complaint read. 

“At times, Defendants had no reserves whatsoever. Further, these reserves did not contain U.S. dollars, as Tether suggested, but were a mix of other assets, such as overcollateralized loans and other undisclosed commercial paper.”

According to the Tether announcement, the court correctly held that the plaintiffs’ complaint lacked any “plausible allegations of injury” because it includes no facts showing that “USDT had a diminished actual value at all.”

The company stated, “The dismissal of the entire class action at this very early stage of the proceedings underscores the fact that the plaintiffs’ claims lacked any legal merit.”

Additionally, Tether CTO Paolo Ardoino tweeted his support for the decision, adding: 

“The Court correctly held that plaintiffs’ complaint lacked any “plausible allegations of injury” because it includes no facts showing that “USDT had a diminished actual value at all.””

On Aug. 4, Ardoino raised suspicions about recent stablecoin market movements with some cryptic statements. He hinted at market manipulation geared to depeg USDT whilst mentioning newly launched stablecoin competitor First Digital’s FDUSD.

Tether didn’t fare well in recent ratings from an independent nonprofit stablecoin rating agency. USDT was rated as a ‘D’ due to a lack of decentralization and governance issues. 

Stablecoin Ecosystem Outlook 

Nevertheless, Tether remains the stablecoin market leader by a big margin despite a slew of newly launched competitors.

USDT circulation is currently at an all-time high of $83.9 billion, according to the Tether transparency report. This gives the stablecoin a commanding market share of 66.7%. Moreover, USDT supply has increased by 26.7% since the beginning of the year.

Furthermore, the nearest rival Circle has a USDC supply of $26 billion giving it a share of 20.7%. However, its supply has declined by 41.5% since the beginning of 2023.

MakerDAO’s decentralized DAI, the third largest stablecoin, circulates $4 billion and holds a market share of 3.2%.