Supreme Court Judge Requests Litigants to Modify Scope of Bitfinex Injunction in Latest USDT Court Case
The case involving Bitfinex and Tether saw a small push forward when a New York City judge required the embattled Bitfinex to submit specific documents that may be related to the 850 million cover-ups between the crypto exchange and Tether. During a hearing which took place on Monday, the New York City Supreme Court judge, Joel M. Cohen, asked both parties to the case to first figure out a thing or two.
Conditions To Be Met
Before the documents are turned over to the court, Cohen asked that even though the preliminary injunction gotten by the New York Attorney General stays unchanged, something must be done about the scope of the injunction.
According to him:
“The preliminary injunction that we have right now is vague, open-ended and not sufficiently tailored to precisely what the AG has shown will cause imminent harm. I think it’s both amorphous and endless.”
Following this, the judge gave both parties a week to properly iron out the scope and also suggested, if possible, that they return with one single revision to scope as agreed by both of them.
“What I would suggest you both do is meet and talk about it, you seem like a reasonable group, in let’s say a week either with a single or proposed revision that accomplishes what we’re trying to accomplish here, and if you can’t, with individual proposals.”
Other Specifics Of The Case
April 25th was the day the injunction was initially filed. It was also the day that the New York Attorney General’s Office disclosed that a loan of $1 billion was removed by Bitfinex from Tether’s stash even after the firm had “handed over” $850 million to a payment processor known as Crypto Capital, based in Panama. The authorities in charge of Crypto Capital have since been charged to court.
Also, sometime last week, there was a motion from the representatives of Bitfinex and Tether filed in court. The motion sought to either seriously alter the details of the preliminary injunction originally secured by the New York Attorney General’s office, or totally dispose of it. They hoped to achieve this, predicting the motion on the basis that preventing Bitfinex from using the funds received from Tether would be too calamitous.
According to the attorneys David Miller and Zoe Phillips of Morgan, Lewis and Bockius and also Jason Weinstein and Charles Michael of Steptoe and Johnson:
“The balance of equities strongly favours Bitfinex and Tether, because a preliminary injunction would not protect anyone but would instead cause great disruption to Bitfinex and Tether – ultimately to the detriment of market participants on whose behalf the Attorney General purports to be acting.”
Furthermore, according to Dong Zhao – a shareholder of the exchange firm, Bitfinex is also trying to raise funds to the tune of $1 billion, through a token sale. This money, it is though, is what the firm hopes to use to give itself a soft landing from all the recent loss.
Effect On Bitfinex And The Crypto Market
On the exact day the injunction was filed, many cryptocurrencies seriously lost value and within one hour, the entire market lost at least $10 billion. The injunction has also had a considerably painful effect on Bitfinex itself as, since the filing, customers of the firm have withdrawn more than 30,000 Bitcoins and at least 1 million Ether tokens leading to the firm losing almost $180 million.
Is The USDT A Security?
With all the developments surrounding the case, there was nothing conclusive from Cohen about the decision as to whether or not the dollar-pegged USDT should be a security. This decision would also ultimately determine whether or not the New York Attorney General’s office has direct jurisdiction. Cohen described it as a “threshold question” but didn’t push much further.
David Miller, one of the lawyers for Bitfinex, has pointed out that the Martin Act allows the New York Attorney General’s office to exercise regulations on securities and commodities as well as the actual places where the trading of these assets takes place. Miller, however, noted that the USDT does not satisfactorily satisfy some parts of the Howey Test.
The Howey Test is used by the Supreme Court to decide whether or not something is security.