New York Judge Denies Bitfinex’s Motion to Vacate Preliminary Injunction
The presiding judge over the New York OAG v. Bitfinex/Tether proceedings just ruled on Bitfinex’s ‘Motion to Vacate’ the OAG’s request for a preliminary injunction against them.
That ruling can be found here:
Bitfinex’s Motion to Vacate the OAG’s Request for Production of Documents Was Denied
As a result of this order, the preliminary injunction that the OAG requested against Bitfinex has been granted (in some parts).
- This preliminary injunction is in place for 90 days (will be reviewed after this period is over).
- No more loans can be given out from Tether to Bitfinex.
- U.S. reserves for Tether cannot be used for any other reason than as reserves. So, the money cannot be moved for the purposes of investment, loaning it out to 3rd parties, etc.
- Tether is allowed to operate under the injunction. To be clear, if customers decide to pay for Tether tokens and they accept that payment, they are free to send that to them. Likewise, they are able to redeem Tether tokens as well.
- None of the services that was described in #3 can be done with Bitfinex though. This means that Bitfinex is not able to redeem Tether tokens with Tether or receive Tether tokens from the Tether treasury.
- Bitfinex/Tether is not allowed to make any “distribution or dividend to any principle, executive, employee, agent, investor, or associate of Bitfinex and Tether from funds that have been loaned, extended, or otherwise taken from U.S. dollar reserves held by Tether.”
- Tether is allowed to meet payroll or fund their regular business operations — they just can’t do so with the funds that are in reserve.
- Neither Bitfinex or Tether are allowed to destroy/delete/modify (etc.) any documentation, communications, business records, etc., that pertain to their business operations.
Brief Analysis of This Order and What it Means
Preliminary injunctive relief is a normal part of these proceedings (civil/criminal prosecution under the ‘Martin Act’). So it shouldn’t come as a shock that these preliminary injunctions have been sought.
However, for those that believe that Bitfinex is actually operating as a stand-up, solvent organization that has done absolutely nothing wrong, then this injunction should not be seen as a negative because it will likely have no material impact on their business operations.
But if this is not the case for any reason, then this could spell out trouble for iFinex Ltd. (parent company over Bitfinex and Tether).
The fact that the OAG’s request for the production of documents was granted by the judge means that the legitimacy of iFinex Ltd., will be definitively settled in the Supreme Court of New York at some point in the near future.
The Preliminary Injunction is Not a Punishment
To be clear, this was not issued as disciplinary action. Rather, the OAG determined that, based on the evidence that they have aggregated thus far, they felt that the measures they proposed would be necessary to protect investors if they do, in fact, need to be protected. If this end cannot be met, then the OAG is hoping to at least minimize any further damage to investor interest with this injunction (as stated in the original court filing).
Overall, the order does not seem to be structured with the intent of stopping Tether or Bitfinex at all. Instead, it appears the order is targeted to ensure that Tether can only operate in a legitimate manner and not be a crypto scam as the industry has called USDT all together.
The document production is absolutely critical for this case, because they’re going to have to give a whole hell of a lot more than the bank statements that they’ve given to the public thus far. Again, if Bitfinex is operating above board, then the productions of documents should be of no material concern for them. In fact, it would exonerate Bitfinex, if anything. But if Bitfinex is not operating entirely above board, then this just puts them squarely under the gun, so to speak.