BitFinex To The 850M USD Loss Claim: Court Filings Were “Written In Bad Faith”

The New York Attorney General Letitia James announced yesterday that she obtained a court order against iFinex Inc., the operator of the popular cryptocurrency exchange Bitfinex and the stablecoin issuer Tether Limited.

Today, Bitfinex has published a post on its blog responding to the NYAG court filings saying that the order was “written in bad faith” and “riddled with false assertions.”

Covering $850 million loss with Tether reserves

According to the NYAG, Bitfinex covered up an $850 million loss with giving itself access to $900 million worth of Tether’s reserves, from which the cryptocurrency exchange took at least $700 million.

The New York Attorney General’s office stated that its investigation revealed that Bitfinex had sent $850 million of corporate and customer funds to a Panamanian company Crypto Capital Corp, a payment processor that is allegedly holding the funds of other cryptocurrency exchanges, including QuadrigaCX that had reportedly lost $190 million after the sudden and mysterious death of its CEO.

The court order issued by the NYAG bars Bitfinex operators from further draining Tether’s reserves or taking personal distributions or dividends from the reserves as well as from “destroying, deleting, or permitting others to delete, potentially relevant documents and communications, including documents and communications stored on any self-deleting or ‘ephemeral’ computer applications.”

Tether and Bitfinex are compelled to produce relevant documents and information to Letitia James’ office. The NYAG added that the companies have failed to produce the documents above to the authorities.

Bitfinex responds to the court order

According to the announcement Bitfinex has published on its blog today, the NYAG’s office released the order is obtained, without notice or hearing, “in an attempt to compel Bitfinex and Tether to provide certain documents and seeking certain injunctive relief.”

“The New York Attorney General’s court filings were written in bad faith and are riddled with false assertions, including as to a purported $850 million “loss” at Crypto Capital. On the contrary, we have been informed that these Crypto Capital amounts are not lost but have been, in fact, seized and safeguarded,” Bitfinex stated.

The history of Tether’s scandals

The cryptocurrency exchange added that it is actively working to “exercise its rights and remedies” to get the $850 million released and that the NYAG “seems to be intent on undermining those efforts to the detriment of our customers.”

Bitfinex stated that both the crypto exchange and the stablecoin issuer is fully cooperating with the New York Attorney General’s Office adding that the NYAG should focus on aiding and supporting the recovery of the $850 million that has been allegedly lost.

“Both Bitfinex and Tether are financially strong – full stop. And both Bitfinex and Tether are committed to fighting this gross overreach by the New York Attorney General’s office against companies that are good corporate citizens and strong supporters of law enforcement. Bitfinex and Tether will vigorously challenge this, and all other actions, by the New York Attorney General’s office,” the cryptocurrency exchange stated.

Still no audits on Tether’s reserves

According to the NYAG’s court filings, Bitfinex had access and taken $700 million of Tether’s reserves despite the fact that that Tether claims that its USDT stablecoin is pegged 1-on-1 to USD.

The company’s history of scandals has revealed that – despite claiming the 1-on-1 peg – Tether has never gone through a real security audit over its reserves.

One time, the stablecoin issuer hired the firm Friedman LLP that published a vague preliminary report to fire the firm before it could conduct its full audit over Tether’s reserves.

In November 2018, the Bahamas-based Deltec Bank & Trust Limited claimed that Tether had the same amount of reserves on its bank account as the total worth of USDT tokens in circulation.

However, in the light of the recent news, it remains a question of whether Deltec’s claim is valid.

The post BitFinex To The 850M USD Loss Claim: Court Filings Were “Written In Bad Faith” appeared first on CryptoPotato.

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