NYAG Calls for Release of Bitfinex-Tether Deal Documents

The legal tug-of-war between New York Attorney General (NYAG) Letitia James and Bitfinex continues as the former struck back at the latter, telling a local court that Bitfinex should turn over all documents that cover the nearly $900 million line of credit issued to them by Tether.

This filing is the latest move in the ongoing legal drama surrounding Bitfinex and its parent company iFinex. The NYAG released a statement in late April accusing Bitfinex and Tether of working together to cover up an $850 million dollar loss sustained by the former.

Corporate cover-up still claimed by NYAG

Our investigation has determined that the operators of the ‘Bitfinex’ trading platform, who also control the ‘tether’ virtual currency, have engaged in a cover-up to hide the apparent loss of $850 million dollars of co-mingled client and corporate funds,” said Attorney General James.

iFinex’s legal team has since countered the allegations, saying that “contrary to the portrayal in the Attorney General’s brief, the supposedly ‘conflicted’ transaction was undertaken with safeguards to ensure that the result reflected an arm’s length deal.”

The NYAG emphasized in its original injunction that they did not want to restrict Bitfinex and Tether from continuing to operate; the injunction did, however, prevent Bitfinex from getting any additional funds from Tether.

This point was further reiterated by the NYAG’s latest legal filing released Saturday, with the filing noting that “the order does nothing to limit Respondents’ ability to operate their business in the normal course, as they have continued to do since the injunction.

No official contract with Crypto Capital

The filing also shed additional light on the NYAG’s findings regarding how Bitfinex lost $850 million to payment processor Crypto Capital Corp:

In 2018, Bitfinex placed over a billion U.S. dollars of wrongfully co-mingled client and corporate funds, including from clients in New York, with an overseas entity called Crypto Capital Corp., which Bitfinex was using as an intermediary to wire U.S. dollars to virtual currency traders using its platform.”

“Bitfinex gave money over to Crypto Capital because Bitfinex was unable to find a reputable bank, anywhere in the world, that would work with it at the time to process its traders’ deposit and withdrawal requests.

Despite the hundreds of millions of dollars it was handing over, Bitfinex never signed a contract or other agreement with Crypto Capital.”

“In mid-to-late 2018, executives at Bitfinex/Tether began to suspect that Crypto Capital had lost, stolen, or absconded with the funds, and as of today, the companies have been unable to locate, much less recover, approximately $851 million dollars handed over to Crypto Capital. None of that had been disclosed to investors.

Inconsistencies prompted need for clarity

The filing claims that inconsistencies in Bitfinex’s testimony regarding its dealings with Crypto Capital were among what prompted the NYAG to require documents that would shed additional clarity on the details of the loan provided by Tether.

We’ve given you much latitude to resolve these situations and months beyond your original estimates, we need to have more transparency now,” the filing reads.

While that and other discrepancies do not change the core issues in this case – that Bitfinex and Tether misled their clients and investors – they only heighten the OAG’s need to obtain documents and information in a timely, organized fashion so that the OAG may understand what has taken place, and what continues to take place, at these companies.