Crypto firms Bitfinex and Tether have come to terms with the New York Attorney General (NYAG) and ended a lawsuit that began in mid-2019.
As part of the settlement, Bitfinex and Tether have agreed to pay New York state fines of $ 18.5 million, according to a statement from New York Attorney General Letitia James.
In April 2019, NYAG’s office claimed Bitfinex used Tether’s funds to secretly fund $ 850 million that was lost to payment processor Crypto Capital. The lost funds allegedly sparked withdrawal problems for Bitfinex customers in late 2018.
Bitfinex said at the time that it had not lost any money. Instead, Crypto Capital’s funds have been seized by government agencies in Portugal, Poland, and US-based Bitfinex has since attempted to reclaim those funds.
As part of today’s agreement, Bitfinex and Tether admitted that they had not committed any wrongdoing. Jason Weinstein, a partner at Steptoe & Johnson and an advisor to Bitfinex and Tether, told The Block that the NYAG office’s findings “are limited only to the nature and timing of certain disclosures.”
“Contrary to online speculation, there has been no finding that Tether ever released Tethers [USDT] without backing or manipulating crypto prices, “said Weinstein, a former federal prosecutor.
However, the NYAG office announced that USDTs were “not 1: 1 covered by USD from Tether in a bank account” from at least June 1, 2017 to September 15, 2017.
“Rather, the funds allegedly supporting Tether were held in an account under the control of his General Counsel, with the balance shown as a ‘claim’ on Bitfinex. No one examining Tether’s accounts would have reasonably understood that the 382,064 $ 782 listed as cash Reserves for tether straps had not been deposited into Tether until the morning of Friedman [U.S.-based accounting firm] Bank balance checked. “
On the other hand, the tapes were no longer backed 1: 1 by US dollars as of November 2, 2018, the NYAG office said, adding, “Tether’s misrepresentation would continue until the end of February 2019.”
“Tether’s claim that its virtual currency was fully backed by US dollars at all times was a lie,” James said in a statement, “she continued, adding,” These companies were hiding the real risk to the investor exposed and operated by unlicensed and unregulated individuals and companies operating in the darkest corners of the financial system. “
Stuart Hoegner, General Counsel of Bitfinex and Tether, told The Block that the settlement amount “should be viewed as a measure of our desire to leave this matter behind and focus on our business”.
Under the settlement agreement, Tether agreed to provide the NYAG office and the public with a quarterly update of USDT reserves, a recommendation that NYAG agreed to. “We share the attorney general’s goal of increasing transparency,” Hoegner told The Block. “We would publish additional information on Tether’s reserves to both the Attorney General and the public every quarter” for the next two years.
In the settlement agreement, the NYAG office also confirmed Bitfinex’s recent repayment of the loan to Tether. Earlier this month, Bitfinex announced that Tether had repaid the remaining $ 550 million loan balance in January and closed the line of credit.
The settlement ends the longstanding legal dispute in which attorneys on both sides once argued before a New York court of appeal. Bitfinex and Tether said they provided the NYAG office with more than 2.5 million pages of documentation to help close the matter.
Editor’s note: This report has been updated with additional information and context from the NYAG Settlement Agreement.
© 2021 The Block Crypto, Inc. All rights reserved. This article is for informational purposes only. It is not offered or used as legal, tax, investment, financial or other advice.
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