Anderson v. Tether Holdings Limited

Background

Matthew Anderson and Shawn Dolifka brought a proposed class action against Tether Holdings Limited, Tether Limited, Tether International Limited, Tether Operations Limited, IFINEX Inc., BFXNA Inc., and BFXWW Inc. The complaint asserted claims under New York and Nevada deceptive-trade-practices laws, breach of contract, breach of implied contract, unjust enrichment, and requests for declaratory and injunctive relief.

The plaintiffs alleged that Tether issued and sold USDT, a cryptocurrency token intended to maintain a value of one U.S. dollar. They alleged that Tether repeatedly represented that it held cash reserves equal to the number of USDT in circulation and promised professional financial audits. According to the complaint, Tether’s reserves were not entirely cash and were worth less than the value of all USDT in circulation. The plaintiffs also alleged that Tether had not completed a professional financial audit. They claimed to have purchased USDT between 2017 and October 24, 2021, and sought to represent consumers who had purchased USDT since 2014.

Defendants’ Motion

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(1), which concerns the court’s subject-matter jurisdiction, and Rule 12(b)(6), which concerns whether a complaint states a legally sufficient claim. The plaintiffs asserted federal jurisdiction based on diversity of citizenship and the Class Action Fairness Act.

Court’s Analysis

The court focused on constitutional standing. Standing requires a plaintiff to show a concrete and particularized injury, a connection between that injury and the challenged conduct, and the possibility that a favorable court decision would remedy the injury.

The court held that the plaintiffs had not adequately alleged an injury in fact. They did not allege the prices they paid for their USDT, whether or at what prices they sold the tokens, or any resulting loss in value. The court took notice of publicly available information indicating that USDT could still be sold for its pegged value of $1.00. The plaintiffs also alleged that they would not have bought USDT at the same price if they had known the representations were false, but the court found that this did not show that the tokens had lost actual value.

Ruling

Judge Laura Taylor Swain granted the defendants’ motion to dismiss the complaint for lack of subject-matter jurisdiction in its entirety. The order did not decide whether the plaintiffs’ underlying deceptive-trade-practices, contract, unjust-enrichment, or other claims were substantively valid.

The plaintiffs were allowed to move for leave to file an amended complaint within 21 days of entry of the order. Any such motion had to include a proposed amended complaint and a redline comparing it with the original complaint. The order stated that if the plaintiffs did not file that motion within 21 days, their claims would be dismissed for lack of subject-matter jurisdiction without further advance notice.