Bitfinex and its associated stablecoin Tether, as a part of the ongoing investigation into its finances, has revealed in court that it used a portion of its USD reserves to invest in Bitcoin (BTC), The Block reports.
The publication obtained a transcript of the court proceedings and in it, attorney for Bitfinex David MIller said that “Tether actually did invest in instruments beyond cash and cash equivalents, including bitcoin.”
Yep. People buying hundreds of millions of dollars of Tethers despite them losing 850 million dollars in a criminal money laundering investigation. Makes sense. Safe place to put money.
Especially with Tether admitting to front running their customers with reserves. pic.twitter.com/fLmfm72aGu
— Bitfinex’ed (@Bitfinexed) May 22, 2019
New York Supreme Court Judge Joel M. Cohen addressed the issue of a stablecoin investing in a volatile asset,
Tether sounded to me like sort of the calm in the storm of cryptocurrency trading. And so if Tether is backed by bitcoin, how is that consistent? If some of your assets are in a volatile currency that Tether is supposed to somehow modulate, that seems like it’s playing into what they are saying.
Tether and Bitfinex have had a lawsuit slapped on them by the New York Attorney General’s Office, and the former has been accused of covering up $850 million in losses through the use of illicit funds. Tether and Bitfinex vowed to fight the case, saying that the lawsuit was “filled with inaccuracies.”
Investors, on the other hand, were not surprise that Tether lacked the funds to support all of its stablecoin’s circulating supply and many have already started abandoning the exchange and token. The NY Supreme Court ordered Tether to freeze transfers to Bitfinex.
