The company never disclosed the loss to its investors
On April 25, 2019, New York Attorney General’s office has told in a written announcement that crypto exchange Bitfinex lost 850 million USD and then it engaged financing from a subsidiary stablecoin operator Tether to cover the shortage stealthily.
Letitia James – Attorney General official – reported that her office obtained a court order asserting that iFinex Inc. (operator of the Bitfinex virtual asset trading platform) and Tether Limited (issuer of the Tether virtual currency), and their associated entities have been in violation of New York law in connection with current activities that may have defrauded New York-based crypto investors.
L. James said: “Our investigation has determined that the operators of the ‘Bitfinex’ trading platform, who also control the ‘tether’ virtual currency, have engaged in a cover-up to hide the apparent loss of $850 million dollars of co-mingled client and corporate funds. 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.”
According to the paper, Bitfinex never disclosed the loss to its investors. Meanwhile, executives of the exchange and Tether participated in a series of corporate transactions where Bitfinex got access to up to 900 million USD of Tether’s cash reserves. Bitfinex presumably got not less than 700 million USD from Tether’s reserves and then used the funds to fill the gap and hide inability to handle customers’ withdrawals.
The court has ordered the operators of the companies to immediately stop the dissipation of the U.S. dollars that back Tether tokens and to produce case-related information and documents. The ruling also prohibits the parties from destroying potentially related documents.
Author: Helen Darkhouse