Bitfinex and Tether allegedly operated illegally in New York

July 9, 2019

The New York Attorney General's Office has filed a Memorandum of Law against cryptocurrency exchanges Bitfinex and its sister company Tether. The filing claims Bitfinex and Tether have run an unregistered security offering, issued tethers as loans and illegally conducted business in New York, even though they are banned from operating there, according to a report by Yahoo Finance.

If the allegations are true, it would mean the exchanges offered unbacked tethers as loans, despite claims that these "stablecoins" were backed by real money in offshore back accounts. Bitfinex has now claimed that the tethers are 74% backed.

This is not the first time Bitfinex has run into trouble with the law. In April 2019, the NYAG alleged the exchanged had dipped into Tether's reserves to use a slush fund to fill a $850 million hole due to losses from its payment processor Crypto Capital Funds. The company then paid back Tether with a line of credit through a ledger entry with Crypto Capital. Law enforcement in the past have seized multiple bank accounts of Crypto Capital Funds in Poland, Portugal and the U.S.

The NYAG claims that it has jurisdiction over Bitfinex and Tether because it opened accounts in multiple New York banks and operated in the state despite being banned from doing so.

Topics: Bitcoin, Mobile Payments, Regulatory Issues

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