Bitfinex is wrong to think they can halt the investigation: Says NYAG

In a filing with the New York State Supreme Court’s Appellate Division, the New York Attorney General (NYAG) argues Bitfinex is wrong to think that they are entitled to halt the investigation.

Bitfinex is under the NYAG lens for potential securities and commodities fraud. NYAG suspects that Bitfinex might be illicitly using the reserves of the Tether stable coin claimed to be backed one-to-one by U.S. dollars to cover a financial gap of $850 million due to loss or theft of funds to Crypto Capital.

Related read: Bitfinex files discovery application in an attempt to recover $850 million frozen funds.

The legal battle:

To prevent Bitfinex further depleting of reserves to cover losses, the New York attorney is preparing a legal proceeding against Bitfinex. To certain the facts, the attorney asked Bitfinex to produce certain documents to which the exchange refused and filed for appeal ‘motion to dismiss’ in the court calling the filing from NYAG “written in bad faith” and “riddled with false assertions”.

In its appeal, Bitfinex said that the exchange does not come under the New York jurisdiction as the alleged dispute does not arise from activity in New York and argues tether tokens are not securities or commodities within the meaning of New York’s Martin Act. Therefore asked the court to stop the investigation altogether. However, the court denied the appeal to which Bitfinex appealed for review.

Eight months have passed since the Supreme Court issued the order, and Bitfinex continues to evade producing the core materials. NYAG now pushes for its case.

In the 4th Dec brief, NYAG says that it has the jurisdiction authority to carry investigation and points out evidence of exchange’s Chief Strategy Officer based in New York and operating a business in the area such as assisting New York-based customers with trading activity and giving tethers loan to a New York-based firm.

Bitfinex and Tether response to the brief filing:

Bitfinex and Tether respond with a filing yesterday and mentions in the blog post-NYAG’s brief as “highly misleading factual presentation”. A section of the blog post reads, “Attorney General has not identified any victim in this whole proceeding, because there is none. Holders of tethers are entitled to redeem them for exactly what they paid for them – no more and no less – and Tether has had no issue satisfying redemption requests to anyone”.

Additionally, tether argues that NYAG should not forget the fact that “Bitinex repaid $100M of the loan months ago, ahead of schedule, and with interest”. Therefore NYAG should not say that they [$850 million] are “unlikely to be repaid”.