Bitfinex, the popular digital currency trading platform, now faces state claims that it hid $850 million of corporate-client funds in a cover-up between itself and Tether. This comes after the exchange lost an appeal to the appellate divisions of the Supreme Court in New York arguing that tether (USDT) was not a traditional commodity or a security.
Last year in April, New York Attorney General Letitia James claimed that Bitfinex and other associated companies were involved in hiding the loss of the conflated funds and then using affiliated stablecoin Tether money to cover the loss. The charges were subsequently pressed, and the case was lately heard by the Appellate Division of the NY State Supreme Court.
iFinex, a company owned by both Bitfinex and Tether, argued that the state did not have the right to pursue the claims because the company was not based in US, and NY jurisdiction would also not apply. However, the reminds it had all jurisdiction against Bitfinex since many of its employees work in NY and also considering the fact that several residents of the country use USDT.
Apparently, Bitfinex claims to have deposited the funds with a Panamanian firm-Crypto Capital. The firm is believed to have provided shadow banking services to digital asset exchanges prior to being seized by different authorities. The firm said the lost funds were under the control of the Polish, American and Portuguese Governments. Bitfinex said it was working to get the funds back.
Bitfinex-Tether Lawsuit Timeline
The lawsuit dates back to two years after New York Attorney General Letitia James initiated an investigation into the suspicion that Tether had inadequate funds and liquidity to allow users to redeem USDT at market value. The investigation would have cut across iFinex and several other trading companies.
In 2019, Letitia signed a subpoena seeking information on Tether ‘s operations. iFinex accepted the subpoena and submitted several documents at the request of the court. However, the court found that the company had not produced all the information within the scope of the lawsuit.
This move alarmed that the exchange might not have enough backing to support the supply of its stablecoin.
“Today’s decision validates our office’s ability to use its broad and comprehensive investigative powers to protect New Yorkers,” James said in a statement. “Not even virtual currencies are above the law. We are pleased with the court’s decision, and will continue to protect the interest of investors in the marketplace.”