Just In: Bitfinex Says It Will Fight This Gross Overreach By The NY Attorney General Office

Bitfinex, which owns the controversial stablecoin Tether, has responded to an order by the New York Attorney General’s office, which released an order that forces Bitfinex and Tether to provide specific documents.

The New York AG’s office legal filing claims that the Bitfinex exchange has made use of illicit transactions to cover up $850 million in missing funds. The sum, according to the filing, was taken from Tether’s reserves to pay users of the exchange who were demanding withdrawals.

The filing refers to a “Merlin”, a Bitfinex executive who asked if it was possible to get money in “Tether or any form”,

The situation looks bad. We have more than 500 withdrawals pending and they keep coming in … [T]oo much money is parked with you and we are currently walking on a very thin crust of ice…BTC could tank to below 1k if we don’t act quickly.

The filing also states that the AG’s office began investigating Bitfinex and Tether in 2018, which included obtaining documents and information from third parties that have worked with Bitfinex and Tether in the past.

The cryptocurrency market has suffered since the news broke, though whether or not there is any correlation between the two events is up for debate.

Tether’s response has been stern and indicates that the two companies are going to resist any legal action that it might face.

Tether Facing More Questions

Banks have also stopped serving Tether, including Wells Fargo, which stopped facilitating transfers between Tether and Bitfinex. The filing reads,

Prior to 2017, Bitfinex and Tether had used several Taiwan-based banks to make and receive wire transfers to fulfill client orders for U.S. dollars. and for other purposes. Wells Fargo acted as the correspondent bank. In March 2017. Wells Fargo elected to no longer process U.S. dollar wire transfers from Bitfinex and Tether accounts, forcing the companies to quickly find alternative arrangements.

Tether’s finances came into question last year, when investors and analysts wondered if the company actually had the funds to back its Tether supply, which it does on a 1:1 ratio. 59% of polled investors do not believe that Tether has the funds to back its supply.