The New York State Office of the Attorney General (OAG) recently sanctioned iFinex Inc., the operator of the virtual currency exchange Bitfinex, and Tether Limited, issuer of the “tether” token, and their related entities in connection with findings from an OAG investigation into the entities. The court order requires that the operators of the companies immediately cease further dissipation of the U.S. dollar assets which back “tether” tokens while OAG’s investigation continues, and produce requested documents and information.
OAG’s findings follow subpoenas that had been issued to the entities following the publication of OAG’s 2018 Virtual Markets Integrity Initiative Report, which examined the practices of virtual currency trading platforms, including Bitfinex. iFinex and Tether market “tether” tokens as so-called “stablecoins” and claim that they are backed 1-to-1 by U.S. dollar cash reserves. However, OAG has accused Bitfinex of withdrawing over $700 million from these cash reserves in efforts to mitigate an inability to handle customer withdrawals and losses that had not been disclosed to investors, which include New York State residents.
Bitfinex issued a statement in response to the allegations, claiming that the findings were “written in bad faith and are riddled with false assertions.”
We will continue to monitor developments in the case going forward.
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