After more than two years of litigation and investigation, iFinex and stablecoin issuer Tether reached a $ 18.5 million settlement with the New York Attorney General (OAG) today without admitting any wrongdoing.
Originally endorsed based on results of a 2018 subpoena, the OAG claimed in 2019 that the Bitfinex cryptocurrency exchange used funds from Tether, both operated by iFinex, to incur losses of approximately $ 850 million in customer funds Mismanagement or malicious payment transactions to disguise processor Crypto Capital.
Bitfinex and Tether have a long history of public relations and a lawsuit over maintaining consumer confidence as the OAG allegations fueled rumors that linen printing is fraudulent.
In an agreement announced by the OAG, iFinex, Tether and related companies must now cease trading activities with New York residents and pay the US $ 18.5 million fines, as well as conduct processes to increase transparency, such as: B. the reporting of business functions and public disclosure of the assets that support the leash.
Ultimately, the OAG found that Tether had misrepresented his stablecoin support.
Tether Misrepresented USDT support
“The OAG investigation revealed that by mid-2017 at the latest, Tether had no access to banking transactions around the world and therefore did not hold any reserves for certain periods of time to secure the cables in circulation at the price of one dollar per cable, contrary to his representations.” According to the announcement. “Tether published a self-proclaimed ‘review’ of its cash reserves in 2017 as ‘working in good faith on our behalf to provide an interim analysis of our cash position’. In reality, however, the cash that was supposedly on deposit had not been deposited into Tether’s account until the morning of the company’s ‘verification’. “
The OAG also determined that as of November 2018, the Tethers were no longer one-to-one covered by USD in a Tether bank account.
iFinex was misleading customers
The OAG announcement also stated that suspicions that Bitfinex and Tether were masking Crypto Capital’s loss of $ 850 million in user funds were revealed to be true.
“On April 26, 2019 – after the OAG announced in court documents that approximately $ 850 million had disappeared and Bitfinex and Tether misled their customers – the company made a false statement: ‘We were informed that it These crypto capital amounts are not lost, but actually confiscated and protected, ”says the announcement. “The reality, however, was that Bitfinex actually did not know where all of the client funds held by Crypto Capital were and therefore had no such assurance to make.”
As a supposed stablecoin, Tether is often compared to Bitcoin in order to fix its price volatility. Tether tends to stir up misunderstandings about Bitcoin and cryptocurrency in general, and it is possible that the revelations from this legal saga inform current and future users about the inner workings of USDT and when to remain skeptical.