Bitfinex 18.5m new york

Share post!

bitfinex 18.5m new york

Millions around the country and the world today use virtual currencies as decentralized digital currencies — unlike real, regulated government currencies, including the U.S. dollar — to buy goods and services, often times anonymously, through secure online transactions. Stablecoins, specifically, are virtual currencies that are always supposed to have the same real-dollar value. In the case of Tether, the company represented that each of its stablecoins were backed one-to-one by U.S. dollars in reserve. However, an investigation by the Office of the Attorney General (OAG) found that iFinex — the operator of Bitfinex — and Tether made false statements about the backing of the “tether” stablecoin, and about the movement of hundreds of millions of dollars between the two companies to cover up the truth about massive losses by Bitfinex.


The New York Attorney General (NYAG) Letitia James has issued Bitfinex and Tether with an $18.5 million penalty after both parties settled an ongoing lawsuit.

Tether is a stablecoin that is pegged to the US Dollar, it has been under scrutiny for more than four years as a result of rumours that suggested it wasn’t entirely backed by USD, and that it had a role in manipulating the Bitcoin price in the 2017 bull market.

However, as previously mentioned to Coin Rivet, Bitfinex and Tether CTO Paolo Ardoino dismissed those rumours, adding that there was evidence to the contrary.

Bitfinex & @Tether_to have reached a settlement with @NewYorkStateAG. After 2.5 years and 2.5M pages of info shared, we admit to no wrongdoing and will pay US$18.5M to resolve this matter.

Bitfinex 18.5m new york

Tether ever issued tethers without backing, or to manipulate crypto prices.”

However, the NYAG statement isn’t exactly ambiguous:

“The OAG’s investigation found that, starting no later than mid-2017, Tether had no access to banking, anywhere in the world, and so for periods of time held no reserves to back tethers in circulation at the rate of one dollar for every tether.”

For Bitfinex to claim victory on this particular point is highly misleading. Though the NYAG doesn’t clearly say the Tethers were backed when they were issued, it does say that it discovered that each Tether did not remain unbacked and in fact was unbacked for a significant period of time.

This is a continuing pattern for Bitfinex and Tether, who in the past have shown themselves willing to make any representation that suits them as long as they are able to get away with it.

Bitfinex 18.5m new yorker

Supreme Court, First Department, holding that:

  • Bitfinex and Tether — and other virtual currency trading platforms and cryptocurrencies operating from various locations around the world — are still subject to OAG jurisdiction if doing business in New York;
  • The stablecoin “tether” and other virtual currencies were “commodities” under section 352 of the Martin Act, and noted that virtual currencies may also constitute securities under the act; and
  • The OAG had established the factual predicate necessary to uphold the injunction and require production of documents and information relevant to its investigation in advance of the filing of a formal suit.

Bitfinex and Tether Banned from Continuing Illegal Activities in New York

Today’s agreement requires Bitfinex and Tether to discontinue any trading activity with New Yorkers.

Bitfinex 18.5m new yorke

Recall that up until the NYAG investigation left them with no other choice, Tether was still promoting themselves via their website as keeping each Tether completely backed by USD.

Bitfinex’s attitude toward the investigation is especially galling given some of the statements made by the AG in announcing the end of the investigation, including referencing several instances in which Bitfinex/Tether had lied to the public and investigators. In April of 2019, the company issued a statement giving assurances that the money it had transferred to Crypto Capital were not lost but had been seized and safeguarded.

Bitfinex 18.5m new yorkers

In the face of persistent questions about whether the company actually held sufficient funds, Tether published a self-proclaimed ‘verification’ of its cash reserves, in 2017, that it characterized as “a good faith effort on our behalf to provide an interim analysis of our cash position.” In reality, however, the cash ostensibly backing tethers had only been placed in Tether’s account as of the very morning of the company’s ‘verification.’

On November 1, 2018, Tether publicized another self-proclaimed ‘verification’ of its cash reserve; this time at Deltec Bank & Trust Ltd. of the Bahamas. The announcement linked to a letter dated November 1, 2018, which stated that tethers were fully backed by cash, at one dollar for every one tether.

“Bitfinex and Tether recklessly and unlawfully covered-up massive financial losses to keep their scheme going and protect their bottom lines,” said Attorney General James.

“Tether’s claims that its virtual currency was fully backed by U.S. dollars at all times was a lie. These companies obscured the true risk investors faced and were operated by unlicensed and unregulated individuals and entities dealing in the darkest corners of the financial system.”

The price of Bitcoin immediately rose from a low of $45,800 to $49,000, quelling fears over continuation of a correction that has spanned over the past 48-hours.

For more news, guides and cryptocurrency analysis, click here.

Disclaimer: The views and opinions expressed by the author should not be considered as financial advice.

However, the very next day, on November 2, 2018, Tether began to transfer funds out of its account, ultimately moving hundreds of millions of dollars from Tether’s bank accounts to Bitfinex’s accounts. And so, as of November 2, 2018 — one day after their latest ‘verification’ — tethers were again no longer backed one-to-one by U.S.
dollars in a Tether bank account.

As of today, Tether represents that over 34 billion tethers have been issued and are outstanding and traded in the market.

When No Bank Backs You, Turn to Shady Entities — Bitfinex Hid Massive Losses

In 2017 and 2018, Bitfinex began to increasingly rely on third-party “payment processors” to handle customer deposits and withdrawals from the Bitfinex trading platform.

The companies will also provide greater transparency and mandatory reporting regarding the use of non-bank “payment processors” or other entities used to transmit client funds.

Finally, Bitfinex and Tether will be required to pay $18.5 million in penalties to the state of New York.

In September 2018, the OAG issued its Virtual Markets Integrity Initiative Report, which highlighted the “substantial potential for conflicts between the interests” of virtual currency trading platforms, insiders, and issuers. Bitfinex was one of the trading platforms examined in the report.

This matter was handled by Senior Enforcement Counsel John D.
Castiglione and Assistant Attorneys General Brian M.

Crypto Capital Corp.” Bitfinex responded to pervasive public reports of liquidity problems by misleading the market and its own clients. On October 7, 2018, Bitfinex claimed to “not entirely understand the arguments that purport to show us insolvent,” when, for months, its executives had been pleading with Crypto Capital to return almost a billion dollars in assets.

On April 26, 2019 — after the OAG revealed in court documents that approximately $850 million had gone missing and that Bitfinex and Tether had been misleading their clients — the company issued a false statement that “we have been informed that these Crypto Capital amounts are not lost but have been, in fact, seized and safeguarded.” The reality, however, was that Bitfinex did not, in fact, know the whereabouts of all of the customer funds held by Crypto Capital, and so had no such assurance to make.

Share post!

Leave a Reply

Your email address will not be published.