The New York State Attorney General’s office brought charges against Bitfinex. Prosecutor believes that having suffered a loss of $ 850 million, exchange concealed this fact, using the funds of affiliated stablecoin issuer Tether to cover the damage. The exchange itself denies these allegations, but the news still caused a sharp decline in the price of Bitcoin.
New York State Attorney General Leticia James reported on receiving a court order against the iFinex Inc., which is the operator of Bitfinex and Tether, according to which they must stop violating the laws of New York and mislead residents of the state.
In a statement, the attorney said that during the investigation it was possible to establish that iFinex was involved in the operation to conceal the alleged loss of $ 850 million owned both by the company and its clients. It is assumed that because of this, the exchange in the past had problems with the withdrawal of 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.
Attorney General, New York State
According to prosecutors, Bitfinex give $ 850 million of corporate and client funds to a payment service provider from Panama, Crypto Capital Corp. The latter, presumably, holds assets and other representatives of the cryptocurrency sphere, including the bankrupt QuadrigaCX exchange.
Tether’s reserves were said to have been used to fill the gap, but this was not reported to customers. At the moment, the prosecutor's office says, it has been established that Tether provided at least $ 700 million for these purposes.
It is noteworthy that even last year Bitfinex stated that the services of the exchange would not be available for residents of New York.
Assistant Attorney General of the State of New York Brian Whitehurst took part in the preparation of the suit. According to him, the Bitfinex check was initiated in 2018.
OAG has reason to believe that Bitfinex still allows New York-based individual investors to deposit, trade, and withdraw virtual currencies, and engage in other transactions, on the Bitfinex trading platform.
Assistant Attorney General, State of New York
According to the court order, iFinex managers of various levels, as well as agents, employees, representatives and other affiliated persons are obliged to stop accessing, borrow and in any other way claim the funds held in Tether reserves, and cannot make any changes in documents relating to these events.
At the same time, the document emphasizes that this decision does not mean that the US authorities intend to prevent further trading on Bitfinex and redemption of USDT tokens.
Earlier, representatives of Bitfinex and Tether told the prosecutor's office that as a reason for the retention of funds, Crypto Capital Corp. called their confiscation by the authorities of Portugal, Poland and the United States. However, according to published documents, Bitfinex does not believe in this version.
Representatives of the exchange reacted the charges of the authorities of the state of New York, stating that the court order was issued without any warning or preliminary discussions with the company.
According to Bitfinex, the documents contain false claims, including the loss of $ 850 million.
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.
Also, the statement said that Bitfinex and Tether are in a healthy financial position and intend to challenge the court order.