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Last News | Cryptocurrency Firms Bitfinex, Tether Set New York Attorney General’s Probe


The New York attorney general’s office on Tuesday settled a nearly two-year investigation into the finances and practices of companies that operate the cryptocurrency exchange Bitfinex and the stablecoin tether.

Hong Kong-based IFinex Inc., which operates the Bitfinex exchange, and Tether Ltd. agreed to pay $ 18.5 million to the attorney general’s office. In addition, Tether has agreed to issue quarterly statements detailing its reservations.

The attorney general’s office said the companies had made several false public statements, regarding backing dollar reserves for the tether in 2017 and a situation in 2018 where Bitfinex lost access to around $ 850 million in funds. of her clients that she had placed with an outside company.

When Bitfinex lost its clients’ funds, it borrowed money from home reserves to cover the loss, which it has not publicly disclosed. This money has since been refunded, although Bitfinex is still trying to recover the original $ 850 million.

The settlement ends a long saga that had been hotly followed in the crypto industry. Bitfinex and Tether are both key cogs in the trading markets. If the attorney general’s office had criminally charged them, it could have ramifications for the market as a whole.

“This resolution makes it clear that those who trade virtual currencies in New York State who think they can avoid our laws cannot and will not,” Attorney General Letitia James said in a statement. The attorney general said the companies “recklessly and illegally covered massive financial losses to keep their plan going.”

An important result of the investigation is the agreement to report on cable reserves, which the company has long been criticized for failing to do. Tether has agreed to produce the quarterly report for the attorney general’s office for the next two years, which breaks down reserves by type and percentages.

The company said it would also release this report publicly. In addition, as part of the agreement, the companies will cease all business activity with residents of New York.

“Bitfinex and Tether are pleased to have reached a lawsuit settlement with the New York attorney general’s office,” said Stuart Hoegner, general counsel for Bitfinex and Tether. “The amount of settlement that we have agreed to pay to the Attorney General’s office should be seen as a measure of our willingness to put this issue behind us and focus on our business.”

Tether is a stablecoin, a specific type of cryptocurrency designed to mimic the value of the dollar. Tether is not an investment asset like bitcoin or ether, but has become a key source of liquidity for exchanges, as well as for market makers and other traders, and as a more settlement mechanism. faster than the traditional banking system.

In a market that trades 24/7 around the world, stablecoins have become a necessary item, and none are greater than the tether. There was about $ 2.8 billion of tether in circulation when the attorney general’s office launched its investigation, and there are over $ 34 billion today.

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Ties are pegged at $ 1 and the company has long stated that it has cash reserves to support each outstanding tie. But he never provided public accounts. There have been allegations and studies for years that the company was printing ‘unsupported’ fasteners and using them to manipulate the market.

Tether has therefore become one of the most contentious assets in the crypto market.

“Contrary to online speculation, nothing has revealed that Tether has issued ties without support or to manipulate crypto prices,” said Jason Weinstein, partner at the law firm Steptoe & Johnson, who represented the companies. .

The Attorney General’s business investigation was the result of a larger investigation into cryptocurrency exchanges that the Attorney General’s office launched in 2018. In September of that year, he warned that many exchanges lacked basic guarantees and left consumers vulnerable to exploitation.

The attorney general’s office launched the iFinex probe in April 2019 after discovering that iFinex had taken $ 700 million from the Tether reserve and transferred it to Bitfinex’s balance sheet, after the exchange lost access to about $ 850 million of its clients’ funds held by a third-party payment processor called Crypto Capital.

Crypto Capital and its operators are under investigation by the Department of Justice. The company also had overseas accounts seized by authorities, which is when the Bitfinex funds disappeared.

Bitfinex said it is cooperating with authorities and still hopes to get its funds back.

Write to Paul Vigna at paul.vigna@wsj.com

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