On July 23, 2026, Judge Katherine Polk Failla of the U.S. District Court for the Southern District of New York issued a sealed order granting class-action status to a long-running lawsuit against Tether and Bitfinex. The case, originally filed in 2019, alleges that Tether issued USDT stablecoins without sufficient reserves to artificially inflate the prices of Bitcoin and Ethereum, causing investors to buy at inflated levels. Plaintiffs seek damages potentially reaching hundreds of billions, even trillions, of dollars.
From Individual Complaints to Collective Action
The lawsuit accuses Tether and its sister exchange Bitfinex of using unbacked USDT between 2017 and 2019 to purchase large amounts of crypto assets, creating a false market demand that pushed Bitcoin and Ether prices higher. Investors who bought at those peaks later suffered heavy losses when prices corrected. Previous rounds saw some claims dismissed—including RICO allegations—but the core market manipulation charge survived.
In the February 23, 2026 decision, Judge Failla partially approved the class certification motion while narrowing its scope. The court defined two separate classes: Class A covers any person who purchased crypto commodity futures within the United States or its territories between March 2017 and February 2019. The judge also partially denied the defendants' motion to exclude plaintiffs' expert testimony. The ruling enables affected investors to sue as a group rather than individually, substantially increasing the plaintiffs' leverage and potential payout.
Defendants Fight Back Despite Past Settlement
Tether and Bitfinex have denied all allegations. In 2021, they settled with the New York Attorney General (NYAG) for $18.5 million without admitting wrongdoing, but that settlement only resolved state-level probes and did not prevent federal class action. The defendants indicated they will continue to vigorously defend themselves. The case now moves into deeper discovery and expert testimonies.
Market reaction was muted, with USDT maintaining its $1 peg. However, analysts note that an adverse final ruling could force Tether to disclose more detailed reserve data or even reshape the stablecoin landscape. The litigation is expected to take years to resolve.
Related Developments: Tether's Recent Moves Under Scrutiny
Alongside the lawsuit, Tether and Bitfinex have been in the news for other reasons. In early 2026, reports emerged that Tether, SoftBank, and Bitfinex formed a $3 billion joint venture called '21 Capital' to buy Bitcoin, mimicking MicroStrategy's strategy. Separately, New York prosecutors sought an order compelling Bitfinex and Tether to submit documents related to a $900 million loan. These events keep the spotlight on Tether's financial practices and transparency.
The class certification ruling pushes Tether's conduct back into the court of public opinion and legal scrutiny. The outcome will hinge on evidence disclosure, expert opinions, and the court's interpretation of what constitutes market manipulation in crypto markets.