Bitfinex And Tether Contest Alleged $850 Million Fraud Court Case
If you followed crypto news recently, you have probably heard about the alleged fraud case involving Bitfinex and the Tether (USDT) stablecoin, which had a peg of 1:1 with the U. S. dollar until recently. Now, the two companies are officially contesting the accusations and affirming that there is no fraud case at all.
Last month, the New York Attorney General affirmed that Tether gave $850 million USD of its funds in order to help Bitfinex. The companies share the same owners, so they just moved the money around. The problem, according to the Attorney General, is that this constitutes fraud because Tether was supposed to be backed by USD and it was used to fund Bitfinex.
This happened because Crypto Capital, a payment service used by Bitfinex, did not give it its money recently. The company is also being accused of fraud and its funds may have been frozen by the law enforcement.
Now, iFinex, the holding company which owns both Tether and Bitfinex, went to court to defend its interests. The lawyers from the company affirmed that, at this moment, Tether only has 74% of its total value backed by fiat cash and other reserves. However, the company denies any kind of wrongdoing at all in this case.
The company has proceeded to vacate the court order because, according to their evaluation of the situation, the order was issued on incomplete or incorrect facts using the wrong legal standards. For instance, the company disagrees that there was any “ongoing fraud” and that there are any real victims from this situation.
Also, the company affirms on the document that the New York Attorney General does not even have the proper basis of authority in order to regulate this sphere and this can be considered a very disruptive injunction because it froze over $2 billion USD worth of assets and it was described as a “massive regulatory overreach” with any kind of benefit at all that will cause much harm.
Curiously, the price of Tether does not seem to be very affected by the controversy at all. Last year, when another controversy arose, the value of the token went down to 87 cents. Now, however, the market remains strong, despite the strong doubts that hover over Tether.
Despite the lack of liquidity, users are able to redeem their Tether if they wish as the company is currently taking loans in order to meet the demands of the clients and it is said to have “ample reserves” of cash in any case.
The injunction finished by saying that the court misuses the term “investor” as the token holders are not investors in the company (as they would be if Tether was a security) and affirms that the price peg was not broken even with all the disruption, which shows that the only harm was done by the Attorney General.