By CCN: The office of New York Attorney General Letitia James has officially obtained a court order to request iFinex Inc, the operator of bitcoin exchange Bitfinex and Tether, to cease operations in New York.
The Attorney General’s office found that Bitfinex allegedly handed over $850 million in co-mingled client and corporate funds to Crypto Capital Corp, a company based in Panama.
Bitfinex is said to have never received the funds from the Panamanian firm, leading to the loss of more than $850 million.
The Attorney General’s office alleged Bitfinex granted itself access to Tether’s treasury and mismanaged $900 million of the stablecoin’s cash reserves to “hide” the loss of $850 million.
Attorney General 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.”
HOW DID IT HAPPEN?
The core problem with Tether is that it does not issue public audits like strictly regulated stablecoins such as Gemini Dollar and Circle’s USDC. As a result, investors are unaware of what the potential “receivables” could be and the dealings of Tether.
A public audit would have forced Tether to disclose the alleged $900 million transactions initiated by Bitfinex had it been recorded on the financials of Tether Limited.
Stablecoin with reserve = COUNTERPARTY RISK https://t.co/5Qj2JMguT9
— Andreas ☮ 🌈 ⚛ ⚖ 🌐 📡 📖 📹 🔑 🛩 (@aantonop) April 25, 2019