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.
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.