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Bitcoin Global News (BGN)

April 29, 2019 -- ADVFN Crypto NewsWire -- Murky ties and money movement through through fiat, currency, shares, Tether and debt continue to drag Bitfinex and Tether into predicaments with regulators and raise concerns for their users. The two companies are owned and operated by the larger iFinex, which was used as the the target for the New York Attorney General’s Office in the U.S. to bring the wide range of issues at hand to light.

“New York state has led the way in requiring virtual currency businesses to operate according to the law. And we will continue to stand-up for investors and seek justice on their behalf when misled or cheated by any of these companies.” - Letitia James New York Attorney General

Attorney General Letitia James obtained a court order against iFinex ordering them to cease violating New York law and defrauding New York residents. The most simple and blatant offense being that they companies have not made their customers aware of movements made with their money holdings, and that customers have not been made aware of changes to their policies when made. Just two months previously it was noted by a twitter user that Tether had removed the specific language in their policies that the coin is backed directly by USD dollars, and instead can now be backed in other equivalent forms of value.
 

$850 Million Liquidity Problems

For most people, simply grasping the concept of cryptocurrencies is difficult enough. On top of this, Tether is a stablecoin. It was created as a 1 to 1 USD backed cryptocurrency, meaning that the issuing company would always have the equivalent amount of USD ready to be withdrawn by customers. However, this has clearly not been the case as the New York Attorney General's Office has brought to light.

“Documents provided to OAG demonstrate that by mid-2018. Bitfinex was having extreme difficulty honoring its clients’ requests to withdraw their money from the trading platform because Crypto Capital, which held all or almost all of Bitfinex·s funds, refused to process customer withdrawal requests and refused or was unable to return any funds to Bitfinex.” - Attorney General Order Document

The New York Attorney General’s office alleged that Bitfinex has entirely lost $850 million. The note banking transactions that highlight it was attempted to be covered up by tapping into Tether reserves. The company was then forced to take out a loan to cover the new spread. Regardless of whether users will be able to have their funds withdrawn, the outlook is not positive for any companies involved.

“In an in-person meeting on February 21, 2019. counsel for Bittinex and Tether explained that, in order to make up for the apparent loss of $851 million to Crypto Capital, Bitfinex and Tether were in the process of contemplating a transaction that would permit Bitfinex to draw upon Tether’s cash reserves on an as-needed basis.” - Attorney General Order Document

By: BGN Editorial Staff