New York State Attorney General Letitia James said her office obtained a court order against iFinex Inc., the operator of Bitfinex virtual asset trading platform and Tether Ltd., which issues "tether" virtual currency, amid allegations they defrauded investors of hundreds of millions of dollars.
The decline in crypto markets coincided with the recent decision by the New York Attorney General to take legal action against Bitfinex's parent company for alleged fraud. As such, the filings suggest that Bitfinex has treated Tether's cash reserves as "Bitfinex's slush fund". Executives allegedly cooked up a series of "conflicted corporate transactions" in which Bitfinex gave itself access to up to $900 million of Tether's cash reserves, which Tether repeatedly told investors fully backed its coin one-to-one, the attorney general said.
Cryptocurrencies fell amid reignited regulatory worries and questions around the legitimacy of so-called "stablecoin" tether. Notably, about 80 percent of all bitcoin trading is done in USDT, per data from research site CryptoCompare.
Charles Hayter, CEO of digital currency comparison firm CryptoCompare, said the NY fraud probe into tether was affecting the market.
Following this revelation, crypto markets shed about $10 billion of its value.
The latest allegations against a major player in the nascent world of cryptocurrencies has something in common with past financial scandals: The little guy may end up holding the bag.
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As we already said before Tether has been involved in all kinds of controversial suppositions. Now, with as big a bombardment as this, the offense against Tether is as unopposed as can be imagined.
Well, it was looking like a great week until the New York State Attorney General (NYSAG) filed a lawsuit against Bitfinex.
The exchange wrote in an official statement: "On the contrary, we have been informed that these Crypto Capital amounts are not lost but have been, in fact, seized and safeguarded".
"The company also claims it is now, "...working to exercise our rights and remedies and get those funds released", but does not state who is currently "safeguarding" the company's $850 million Dollars. "Sadly, the New York Attorney General's office seems to be intent on undermining those efforts to the detriment of our customers".
And both Bitfinex and Tether are committed to fighting this gross overreach by the New York Attorney General's office against companies that are good corporate citizens and strong supporters of law enforcement.
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