Bitfinex tether 18.5m york

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.


New York Attorney General Letitia James has announced the outcome of her office’s investigation into Tether and Bitfinex, ordering Bitfinex and Tether to end all trading activity with New Yorkers together with the payment of an $18.5 million settlement.

The statement is long and highly critical of Bitfinex and Tether, accusing them of “recklessly and unlawfully [covering up] massive financial losses” and “illegally trading virtual currencies in the state of New York.”

Bitfinex and Tether must also provide quarterly reports to the NYAG demonstrating that they are now properly segregating corporate and client accounts as well as submitting to mandatory reporting regarding any transfer of assets between the two entities.

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.

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. An agreement with iFinex, Tether, and their related entities will require them to cease any further trading activity with New Yorkers, as well as force the companies to pay $18.5 million in penalties, in addition to requiring a number of steps to increase transparency.

“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.

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. In addition, these companies must submit regular reports to the OAG to ensure compliance with this prohibition.

Further, the companies must submit to mandatory reporting on core business functions.


Specifically, both Bitfinex and Tether will need to report, on a quarterly basis, that they are properly segregating corporate and client accounts, including segregation of government-issued and virtual currency trading accounts by company executives, as well as submit to mandatory reporting regarding transfers of assets between and among Bitfinex and Tether entities.

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.

Whitehurst and Tanya Trakht of the Investor Protection Bureau; Assistant Attorneys General Ezra Sternstein and Johanna Skrzypczyk of the Bureau of Internet and Technology; and Legal Assistant Charmaine Blake — all supervised by Bureau of Internet and Technology Chief Kim Berger and Senior Enforcement Counsel for Economic Justice Kevin Wallace. The Investor Protection Bureau is led by Chief Peter Pope.
Both the Bureau of Internet and Technology and the Investor Protection Bureau are part of the Division for Economic Justice, which is overseen by Chief Deputy Attorney General Chris D’Angelo and First Deputy Attorney General Jennifer Levy.

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.

“These companies obscured the true risk investors faced,” James said in a statement.

Tether is the world’s third-largest cryptocurrency, after Bitcoin and Ethereum, according to CoinMarketCap. Its market value was about $34.8 billion on Tuesday, up from $2.8 billion when James announced her charges in April 2019.

Bitfinex and Tether did not admit or deny wrongdoing in agreeing to settle.

In a statement, they said the funds in question had been fully repaid with interest, and never impacted Tether’s ability to process redemptions.

“The Attorney General’s Office concluded, in essence, that we could have done better in publicly disclosing these events,” Bitfinex and Tether said.

The OAG Investigation Shines a Light on Unlawful Trading in New York State

From the beginning of its interaction with the OAG, iFinex and Tether falsely claimed that they did not allow trading activity by New Yorkers. The OAG investigation determined that to be untrue and that the companies have operated for years as unlicensed and unregulated entities, illegally trading virtual currencies in the state of New York.

In April 2019, the OAG sought and obtained an injunction against further transfers of assets between and among Bitfinex and Tether, which are owned and controlled by the same small group of individuals.

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.

  • Tether, Bitfinex agree to pay $18.5M to end the New York probe.
  • The companies moved hundreds of millions of dollars to cover up the $850M loss.
  • Bitfinex and Tether did not admit or deny wrongdoing in agreeing to settle.
  • On Tuesday, New York Attorney General (NYAG) Letitia James says the owner of the Tether and Bitfinex agreed to pay an $18.5 million fine to settle charges.

    Tether, Bitfinex Agree to Pay $18.5M to End New York Probe

    Tether cryptocurrency and Bitfinex trading platform agreed to pay an $18.5 million fine to settle charges. However, the state’s law enforcement official had been investigating the firms over allegations.

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