Tether to Invest Some Assets in Bitcoin

Stablecoin issuer's attorney David Miller said it at the Supreme Court of the State of New York
22 May 2019   216

According to court documents received by The Block, Tether invested part of Bitcoin and other assets, including cash and cash equivalents.

At the end of April, the New York Attorney General’s Office charged Bitfinex with the fact that, having suffered a loss of $ 850 million, it concealed this fact, using the funds of its affiliated company Stablecoin Tether to cover the damage.

Shortly before this, Tether quietly updated the USDT tokens security policy. According to the updated edition, the company’s stablecoins can be provided with reserves included "traditional currency and cash equivalents", as well as, “other assets and receivables from loans made by Tether to third parties.” Also, as reported, the statement used to read: “Every tether is always backed 1-to-1, by traditional currency held in our reserves.”

Prior to the April 24th order … Tether actually did invest in instruments beyond cash and cash equivalents, including bitcoin, they bought bitcoin.

David Miller

Attorney, Bitfinex

Also during the hearing, Miller complained that the Attorney General of New York restricts Tether in investment activities.

In turn, the New York Supreme Court Judge Joel M. Cohen questioned the logic of the company, finding a contradiction in investing stablecoins in high-volatile assets, like Bitcoin.

Tether sounded to me like sort of the calm in the storm of cryptocurrency trading. And so if Tether is backed by bitcoin, how is that consistent? If some of your assets are in a volatile currency that Tether is supposed to somehow modulate, that seems like it’s playing into what they are saying.

Joel M. Cohen

Judge, New York Supreme Court

He replied that only a small amount had been invested. Also, according to him, according to the updated Tether collateral policy, collateral is allowed not only in cash and cash equivalents, but also in other assets.

The New York State Supreme Court upheld injunction on the use of Tether Limited’s reserves for the investment activities of other companies, in particular the Bitfinex cryptocurrency exchange.

Also, Bitfinex cannot use Tether assets for lending or for other needs, if this is not required by normal business practices. In addition, Tether is forbidden to provide funds from its reserves to employees, unless it is a question of salaries and standard payments.

At the same time, the ruling states that Tether can invest its reserves in the ordinary course of business. The company had already stated at the previous court session that it had used its reserves for investment purposes, but it was not known what investments we were talking about.

Bitfinex Won't Provide All Docs, Which Attorney Require

Bitfinex believes that the decision of the judge is "another victory in the ongoing defence of our businesses against the New York Attorney General"
23 May 2019   199

The judge of the Supreme Court of the State of New York, Joel Cohen, satisfied the demand of the lawyers of Bitfinex and Tether Limited, allowing them to submit only those documents that the State Office of Public Attorney has the right to demand within its jurisdiction.

In particular, the defendants once again stated that the jurisdiction of the State Office of Public Attorney does not apply to companies, since they do not operate in New York, and the so-called Martin Law does not regulate their business at all. In addition, this legislation may not apply to companies registered in another country.

This order is another victory in the ongoing defence of our businesses against the New York Attorney General’s overreach, and it comes on the heels of Justice Cohen’s ruling last week granting our motion to significantly narrow the injunction against our businesses obtained by the Attorney General. We look forward to continuing to challenge the New York Attorney General’s unmeritorious claims, and we will continue to vigorously protect our customers and assert our rights against those making false and unsupported claims against us.

Bitfinex Team

The next meeting in the high-profile case is scheduled for June 29.

Bitfinex promised users to continue the fight against those who make "false and unfounded statements" to the company.