New York Attorney General Announces Court Order Against BitFinex and Tether

New York Attorney General Announces Court Order Against BitFinex and Tether

 
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New York Attorney General Letitia James announced recently that her office has secured a court order against iFinex Inc., a company which operates cryptocurrency exchange BitFinex and issues Tether cryptocurrency, “from further violations of New York law in connection with an ongoing activities that may have defrauded New York investors that trade in virtual or “crypto” currency”.

In what may prove to be a major hit to the entire crypto industry, AG James claims that, based on preliminary findings of their investigation, iFinex engaged in illegal activities to cover up a loss of a staggering $850 million of the client and corporate funds.

“New York state has led the way in requiring virtual currency businesses to operate according to the law.  And we will continue to stand-up for investors and seek justice on their behalf when misled or cheated by any of these companies,” adds James in the statement.

According to James, Bitfinex has lost access to over $850 million of the client and corporate funds, which were handed over to an entity “Crypto Capital Corp.,”, registered in Panama, without any written contract or assurance. Bitfinex investors were never informed of this activity.

In the cover-up phase, “executives of Bitfinex and Tether engaged in a series of conflicted corporate transactions whereby Bitfinex gave itself access to up to $900 million of Tether’s cash reserves, which Tether for years repeatedly told investors fully backed the tether virtual currency “1-to-1.”

The court orders require iFinex to “immediately cease further dissipation of the U.S. dollar assets which back “tether” tokens while the Office’s investigation continues”. As part of the standard procedure in such situations, the company is also asked to refrain from destroying or deleting relevant documents and information.

Tether (USDT) is currently the eighth biggest cryptocurrency in the world with a market cap of $2.83 billion. The digital coin sparked a lot controversy throughout its history due to its design as a stablecoin i.e. allegedly each tether is backed by $1 of assets, a notion that has been strongly challenged by other market participants.

“It definitely brings Tether’s credibility into question. It’s been well known that they have struggled to maintain banking relationships, but this is the first I have heard about them losing access to funds,” said Eric Turner, director of research at Messari, to Bloomberg.

Within an hour of Attorney General’s statement, the crypto market lost over $10 billion in market cap, while Tether is currently down 5% from its weekly high.