New York Attorney General’s Office Accuses Bitfinex Of Covering $850 Million Losses Using Tether Funds


If you are our BitcoinExchangeGuide’s regular reader. You should already know about the shady connection between Bitfinex and Tether. This Thursday, a document by the New York Attorney General’s (NYAG) office revealed that iFinex, the company behind both Tether (USDT) and Bitcoin exchange Bitfinex, is being sued.

In the press release, the attorney general Letitia James said:

“Our investigation has determined that the operators of the ‘Bitfinex’ trading platform, who also control the ‘tether’ virtual currency, have engaged in a cover-up to hide the apparent loss of $850 million dollars of co-mingled 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.”

Popular Bitfinex and Tether critic Bitfinex’ed made a video explaining this incident.

https://twitter.com/Bitfinexed/status/1121538055431651328

The story so far

Although Tether has frequently said that its coins are completely backed by dollars, the group has yet to produce definitive confirmation of its holdings to the public. There are further issues about Tether’s association with Bitfinex. Both have the same CEO. In October, Bitfinex dismissed allegations it was insolvent and said withdrawals were functioning as normal, though it said: “complications continue to exist for us in the domain of fiat transactions.” The new accusations from the New York attorney general’s office will likely bolster the critics. The firms behind Tether and Bitfinex suffered an “apparent loss” of $850 million of the customer and proprietary funds and didn’t tell investors, the attorney general said. Executives then allegedly engaged in transactions that gave Bitfinex access to $900 million of Tether’s cash reserves, according to the attorney general’s statement.

The new probe is looking at how new Tether coins are created and why they enter the market predominantly through Bitfinex. In New York, the firms behind USDT have been told to retain all documents tied to the latest probe by the state’s attorney general. If authorities were to find any evidence of wrongdoing at Tether, or if traders lost faith in the company’s ability to redeem its coins for $1, USDT could quickly lose value.

People are warning to take action if you are exposed to Tether in any way:

Tether Responds To Criticisms

Tether wrote a blog post addressing these criticisms:

The blog post reads:

“The New York Attorney General’s court filings were written in bad faith and are riddled with false assertions, including as to a purported $850 million ‘loss' at Crypto Capital. On the contrary, we have been informed that these Crypto Capital amounts are not lost but have been, in fact, seized and safeguarded. We are and have been actively working to exercise our rights and remedies and get those funds released. Sadly, the New York Attorney General’s office seems to be intent on undermining those efforts to the detriment of our customers.”

They go on to confirm that bothBitfinex and Tether have been fully cooperative to the attorney general’s office and the regulators. They expect the New York Attorney General’s office to focus on recovery efforts. They even say that they “vigorously” challenge the overreach by the attorney general’s office.

Final Take

As a result of the news, BTC started to fall immediately. Within an hour, the price dropped from about $5,520 to under $5,200. However, it has since recovered to over $5,300. Altcoins across the board followed suit, with USDT falling to $0.98 on a number of exchanges.

https://twitter.com/Bitfinexed/status/1121560004220399616

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