Bitfinex Accused Of Hiding $850 Million Loss From Investors And Using Tether Funds To Cover Up

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Bitfinex reportedly used Tether (USTD) to covertly cover an $850 million loss, according to details published by the New York Attorney General’s office.

Tether is a somewhat controversial stablecoin issued by Tether Limited, a company that has had close ties with the Bitfinex crypto exchange.

The Attorney General’s office published the allegations via an announcement on April 25.

As per the statement, Attorney General Letitia James confirmed that her office had taken possession of court documents that tied Bitfinex operator iFinex Inc., USTD issuer Tether, and other entities to a potential cover-up involving the exchange.

It is alleged that the crypto exchange connived with the stablecoin issuer to hide the truth regarding its balance sheet, violating New York laws. In the end, the exchange may have defrauded cryptocurrency investors in the state.

The top state lawyer said that an investigation into the matter had determined that the $850 million loss Bitfinex hid had “co-mingled” both user and corporate funds.

New York has strict laws applied to all virtual currency businesses seeking to offer services to state residents. The New York Department of Financial Services (NYDFS), the state’s financial regulator, requires that crypto businesses acquire the BitLicence to operate.

Referencing this, James noted that her office “will continue to stand-up for investors and seek justice on their behalf when misled or cheated by any of these companies.”

The court filings allegedly revealed that Bitfinex not only hid the massive loss from its investors but secretly engaged Tether in multiple questionable transactions. The exchange then purportedly accessed close to $900 million from cash reserves held by Tether.

With this access, Bitfinex was able to take roughly $700 million from the stablecoin issuer’s reserves. The exchange allegedly used these funds to hide its huge losses as well to mask problems related to funds withdrawals.

According to court documents, the exchange and associated companies have been barred from engaging in further dissipation of U.S dollar reserves that back the circulating USDT. The court also ordered the companies to avail all the documents and information related to the investigation.

Bitfinex and Co have also been warned against any attempt to destroy documents or pieces of information tied to the case.

Seemingly commenting on the issue, one crypto entrepreneur tweeted that Bitfinex would, in essence, pay back the “loan” with interest.

As part of the ‘loan,’ Bitfinex reportedly collateralized its stock totaling 60 million shares. The AG, therefore, wants the court to instruct Tether and Bitfinex to carry on trading in order not to harm their client’s prospects.

The controversy surrounding the issuance of tether rose a notch higher following claims that the stablecoin did not have sufficient USD reserves and a subsequent allegation that the Tether and Bitfinex could have manipulated bitcoin prices via surplus USDT tokens.

U.S. regulators then subpoenaed both companies and a subsequent report from Bitfinex’s banking partner confirmed that there were enough fiat reserves to cover the circulating tokens.


Disclaimer: This is not investment advice. Cryptocurrencies are highly volatile assets and are very risky investments. Do your research and consult an investment professional before investing. Never invest more than you can afford to lose. Never borrow money to invest in cryptocurrencies

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