- A statement by the New York Attorney General reveals that Bitfinex had suffered losses of $850 million
- The company had received an influx of funds from Tether to cover up the losses
An update has been given in the Bitfinex-Tether case after federal prosecutors in the US began probing the exchange and the stablecoin operator on suspicions that price manipulations might have caused a drop in price. This was after the exchange moved to the Communications bank of Hong Kong.
The Attorney General’s office in New York has now revealed that Bitfinex lost $850 million and used funds from Tether to cover up the shortfall. This announcement was made on April 25, 2019, by Attorney General Letitia James, who had obtained a court filing alleging that the operators of Bitfinex, Tether and the associated entities are in violation of New York law in connection with an activity that defrauded New York-based investors.
Caught in the Act
The official document 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.”
The document added that New York has led the way in the enforcement of crypto-related regulations and they will continue to stand up for investors and seek justice for those who have been misled.
The document also shows that Bitfinex never informed investors of the losses and instead, engaged in some transactions with Tether in which they were given access to $900 million dollars worth of Tether’s cash reserves. Bitfinex took nothing less than $700 million from the reserves and used the funds to cover up their insolvency and hide their losses.
Since this has come to light, the operators have been ordered to cease the dissipation of the dollars that back Tether tokens and to provide certain information and documents and are prohibited from destroying any documents relating to the case. The Attorney General is also seeking an injunction to compel the business involved to continue trading to prevent any further losses to investors.
This does nothing to help Tether’s reputation as an alleged manipulator of bitcoin price or the perceived authenticity of operations within the industry. Suspicions of foul play first arose when Tether was suspected of issuing more tokens than they had fiat backing for and then sending the tokens to Bitfinex. This led to an investigation being opened in 2018 and the results of it and now obvious.