bitfinex, tether
Strangely enough, the charges seem to clear looming doubts about the amount of Tether's reserves. | Source: (i) Shutterstock (ii) Shutterstock; Edited by CCN

Bitfinex, Tether Clap Back at NY Attorney General in Coordinated Defense

By CCN: Within a day of learning it had to cease operating in New York, Bitfinex issued a rebuttal desperately trying to explain it is financially solid.

Its letter coincided with one from Tether.

On Thursday, New York Attorney General Letitia James obtained a court order to shut down the pair from operating in the state over the loss of $850 million funds through some questionable happenings.

Both Bitfinex and Tether claim the Attorney General’s move was in bad faith.

Bad Faith Move, We Weren’t Warned

In their rebuttals, Bitfinex and Tether tried to defend themselves by saying the order, which is seeking injunctive relief, was obtained without notice or a hearing in an attempt to compel Bitfinex and Tether to provide certain documents.

The New York Attorney General’s court filings were written in bad faith and are riddled with false assertions, including as to a purported $850 million “loss” at Crypto Capital. On the contrary, we have been informed that these Crypto Capital amounts are not lost but have been, in fact, seized and safeguarded.

While the pair state they have been trying to find remedies to get the funds released, it apparently was too little too late for the Attorney General. They blame the office for any future woes.

Sadly, the New York Attorney General’s office seems to be intent on undermining those efforts to the detriment of our customers. The New York Attorney General’s office should focus its efforts on trying to aid and support our recovery efforts.

The pair claim they are “financially strong – full stop.” Furthermore, they vow to fight what they call the gross overreach by the New York Attorney General’s office against “companies that are good corporate citizens and strong supporters of law enforcement.”

The Lead-Up

The AG’s office specifically requested that iFinex Inc., the operator of bitcoin exchange Bitfinex and Tether, cease operations in New York.

The office alleged the company granted itself access to Tether’s treasury. Then it mismanaged $900 million of the stablecoin’s cash reserves to “hide” the loss of $850 million. The scheme allegedly entailed Bitfinex handing over the money in co-mingled client and corporate funds to Crypto Capital Corp, a company based in Panama.

As part of its alleged scheme, Bitfinex granted itself access to Tether’s treasury and mismanaged $900 million of the stablecoin’s cash reserves to “hide” the loss of the funds.

However, Bitfinex claims it never received the funds from the Panamanian firm.

Attorney General James said:

“New York state has led the way in requiring virtual currency businesses to operate according to the law. And we will continue to stand-up for investors and seek justice on their behalf when misled or cheated by any of these companies.”

Observers Weigh In 

To continue to quell the storm, Bitfinex announced it is holding a week-long “Ask Me Anything” discussion thread on its subreddit r/bitfinex, starting May 3.

That may not be enough, although the charges did seem to “disprove” other looming allegations against Bitfinex, as ShapeShift CEO Erik Voorhees pointed out:

Others expressed concerns about what may happen next for the pair.

Bitcoin’s price fell all day following the AG’s announcement and was at $5,201 at the time of writing.