The New York Office of the Attorney General (AG) wants to take a closer look into the business operations of Bitfinex[1] and related stablecoin issuer Tether[2] (USDT). According to a legal petition[3] filed with the Supreme Court of New York, the NY Attorney General Office of Letitia James is applying for a court order to investigate Bitfinex’s suite of interrelated companies (including its umbrella firm iFinex and Tether Holdings Limited) for “ongoing fraud” to the tune of $850 million.
What does the news mean for Bitfinex, Tether and Bitcoin?
What Is the Legal Action About Exactly?
Prompted by its findings in a 2018 investigative subpoena, the New York Office of the Attorney General alleges that Bitfinex used funds from Tether (a separate company run by the same management) to mask some $850 million in losses in customer funds resulting from potential theft or mismanagement by payment processor Crypto Capital.
Bitfinex ended up relying on the fiduciary services of the Panama-based payment processor following a roulette of troubled banking relationships throughout the years. By mid-2018, Crypto Capital held roughly $1 billion worth of combined business and customer funds on behalf of Bitfinex. The document alleges that Bitfinex entrusted Crypto Capital with these funds without signing a contract or business agreement.
Text-based correspondence cited in the document from mid-2018, which was obtained during the AG’s 2018 investigation, reveal a Bitfinex employee’s persistent yet unsuccessful attempts to retrieve funds from Crypto Capital. The payment processor claimed that the funds were seized by Portuguese, Polish and American authorities, though both the Attorney General and Bitfinex question whether this is true.
In the meantime, complaints of delayed withdrawals from Bitfinex users were rampant. The court document states that despite its issues with Crypto Capital, Bitfinex falsely
