In April of this year, NYAG issued a court order against Bitfinex, accusing the company of unclear management of client funds and borrowing money from its sister company Tether to cover up the seized funds. Bitfinex CEO Jean Louis van der Velde responded that the lawsuit "is full of inaccurate and erroneous judgments."
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In this litigation process, new details about Bitfinex's operations are continuously disclosed. For example, the market has learned that only 74% of the outstanding Tether tokens (USDT) are supported by cash in its reserves.
On February 25 this year, Tether quietly changed a paragraph on its official website, recognizing for the first time that its reserves include traditional currency and cash equivalents, as well as other assets and receivables that Tether issued loans to third parties. Prior to this, Tether had always claimed that the USDT was 100% supported by traditional currency. In the past, every USDT was supported by the traditional currency of our foreign exchange reserves of 1:1.
Bitfinex's attorney, David Miller, said in a court trial record on May 16 that Tether did invest in tools other than cash and cash equivalents, including bitcoin, before the court order was issued on April 24. They bought bitcoin. At the hearing, Miller said that NYAG wants to limit Tether's investment to cash or cash equivalents because they don't like certain investments. Miller claims that NYAG's attempt to exercise regulatory power goes beyond its jurisdiction.
Joel M. Cohen, a Supreme Court judge in New York, questioned this logic. He pointed out that it is contradictory to use stable currency for investing in volatile assets such as Bitcoin. He says:
“In my opinion, Tether is like a calm part of the cryptocurrency trading storm. So, if Tether is supported by bitcoin, how is it consistent with the above? If some of your assets are used Investing in highly volatile currencies, and the existence of Tether was originally intended to regulate this volatility, which seems to prove that there is a problem with their claims."
Miller clarified that this was only a "small sum of money" and that the information disclosed, "especially the information disclosed on February 25, shows that Tether is not only accepting cash or cash equivalents, it also makes other investments, including Purchase other assets."
After the court hearing on May 16, the judge allowed Tether to invest in its cash reserve as part of its business, but issued a preliminary injunction calling for Tether and Bitfinex:
Limit credit line to US dollar reserves
Bitfinex's principals, officers and agents are not allowed to receive dividends from funds received by Tether
Do not tamper with the documents originally requested by NYAG
The preliminary injunction will expire within 90 days, prior to which NYAG may apply for an extension of up to 14 days in order to request an extension of its terms.
Bitfinex said that since the injunction was issued, the company has successfully sold its exchange token LEO financing through IEO for nearly $1 billion. The offering covers a total of $850 million currently frozen in several accounts controlled by payment processing firm Crypto Capital, and Crypto Capital is at the heart of the lawsuit. LEO began trading on Bitfinex on Monday. At the time of publication, the transaction price was $1.0799 and the 24-hour trading volume was $1.202 million.
Author: Celia Wan and Frank Chaparro
Source (Buffalo): Babbitt Information (https://www.8btc.com/article/413806)