Bitfinex, a leading cryptocurrency exchange and its affiliated stablecoin provider Tether are being sued by the New York State Attorney General (NYSAG). Bitfinex was accused of losing $850 million and then using funds from Tether to cover-up the loss.
According to a press release issued Thursday (April 25) Attorney General Letita James has obtained a court order to stop iFinex Inc the company controlling both Bitfinex and Tether from operating in New York. The OAG said that an investigation is ongoing and seeks to identify “fraud being carried out by Bitfinex and Tether”.
In the court order Attorney General James stated:
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,
The New York Attorney General’s office stated that they have reason to suspect that New York traders are still using the exchange, despite Bitfinex saying in 2018 it would no longer serve New York residents.
Bitfinex’s struggle to retain a suitable banking partner in the past year have been well publicised. The lawsuit alleged that they partnered with Crypto Capital Corp., a Panama based payments provider. Furthermore, the OAG alleged that no contract was signed, despite the huge sums of money entrusted to Crypto Capital Corp.
Bitcoin Price Falls 5%
CryptoCompare’s latest exchange review revealed that Tether accounted for over 80% of Bitcoin trading, up from 70% in February. The markets dependence on Tether has been a cause of concern for many in the industry and may well explain the significant impact on bitcoins price, which has fallen over 5% in under an hour.
Despite the launch of several new stablecoins in the last year, Tethers dominance has not been challenged as the leading stablecoin accounts for 98.7% of Bitcoin’s trading volume against four top stablecoins – USDT, USDC, PAX, and TUSD. It remains to be seen whether this court order will deter the market from using Tether as its stablecoin of choice.