New York’s Attorney General alleged the operator of the Bitfinex cryptocurrency trading platform and the issuer of the Tether "stablecoin" lost $850 million which it subsequently covered up using funds from affiliated stablecoin operator Tether.
Tether has frequently been accused of facilitating cryptocurrency price manipulation; it is allegedly backed one-to-one by U.S. dollars, yet the firm has never released a public audit showing it has the reserves to back the coins in circulation, leading many to question whether the funds even exist.
As the WSJ notes, Tether has marketed the coin as a way to get both the safety of the dollar and the speed and anonymity of a digital currency. Its market value has risen steadily over the past two years, to $2.8 billion from about $10 million at the beginning of 2017. Since then it has become a major source of liquidity in the cryptocurrency market, and about 80% of all bitcoin trading is done via Tether, according to data from research site CryptoCompare. Some have speculated that tether is how various Asian accounts have been quietly laundering money into cryptocurrencies, which they then used to circumvent "firewalls" and deposit funds offshore.
Statement Bitfinex:
Earlier today, the New York Attorney General’s office released an order it obtained – without notice or a hearing – in an attempt to compel Bitfinex and Tether to provide certain documents and seeking certain injunctive relief.
The New York Attorney General’s court filings were written in bad faith and are riddled with false assertions, including as to a purported $850 million “loss” at Crypto Capital. On the contrary, we have been informed that these Crypto Capital amounts are not lost but have been, in fact, seized and safeguarded. We are and have been actively working to exercise our rights and remedies and get those funds released. Sadly, the New York Attorney General’s office seems to be intent on undermining those efforts to the detriment of our customers.
Bitfinex and Tether have been fully cooperative with the New York Attorney General’s office, as both companies are with all regulators. The New York Attorney General’s office should focus its efforts on trying to aid and support our recovery efforts.
Both Bitfinex and Tether are financially strong – full stop. And both Bitfinex and Tether are committed to fighting this gross overreach by the New York Attorney General’s office against companies that are good corporate citizens and strong supporters of law enforcement. Bitfinex and Tether will vigorously challenge this, and any and all other actions, by the New York Attorney General’s office.