The New York Attorney General’s Office is now accusing iFinex Inc., the company behind both the cryptocurrency trading platform Bitfinex and the stablecoin operator Tether, of having covered up a massive Bitfinex loss with Tether funds.
New York Attorney General orders iFinex to refrain from further violations
Specifically, the New York Attorney General Letitia James issued a press release on Thursday stating that she had obtained a court order against iFinex.
Moreover, the court order urged iFinex to refrain from ”further violations of New York law in connection with an[y] activities that may have defrauded New York investors that trade in virtual or ’crypto’ currency.”
This court order reportedly mainly stems from an investigation of iFinex, and the allegation that the company has used funds from Tether to ”hide the apparent loss of $850 million of co-mingled client and corporate funds.”
Furthermore, the statement claims that Bitfinex has sent $850 million worth of corporate and customer funds from Tether’s reserve to the Panamanian cryptocurrency payment processor Crypto Capital in an effort to muddy the waters regarding this alleged loss.
Worryingly, the New York Attorney General’s Office is also highlighting that if true, this means that neither the loss itself nor the transfer of funds was shared with customers.
According to the filings, Bitfinex reportedly lost access to the $850 million that it sent to Crypto Capital. It is also alleged that Bitfinex handed over these funds to Crypto Capital ”without any written contract or assurance”.
The price of Bitcoin dropped following this news
Consequently, Bitfinex and Tether executives are said to have ”engaged in a series of conflicted corporate transactions whereby Bitfinex gave itself access to up to $900 million of Tether’s cash reserves”. As such, the filings suggest that Bitfinex has treated Tether’s cash reserves as ”Bitfinex’s slush fund”.
Although it is unclear whether these allegations hold any credence or not, it should be noted that the price of Bitcoin stumbled on the news of this alleged coverup. The premier cryptocurrency first fell nearly 6%, although it has since recovered somewhat, and is currently trading around $5,165.
Nevertheless, Bitfinex has since this issued a statement strongly criticizing the New York Attorney General’s comments:
”The New York Attorney General’s court filings were written in bad faith and are riddled with false assertions, including as to a purported $850 million “loss” at Crypto Capital. 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.”
Rasmus Pihl is a writer for Toshi Times by day and an avid follower of the blockchain industry by night. Rasmus holds a Bachelor’s Degree in Marketing from the Gothenburg School of Business, Economics, and Law and runs a Swedish marketing consulting firm. Moreover, when he isn’t writing for Toshi Times, traveling, working or changing the world in some other capacity, Rasmus is more than likely caught up in postgraduate studies.