Judge rules NYAG can continue Bitfinex Tether investigation

The New York State Supreme Court has ruled that the NYAG can continue Bitfinex Tether investigation over allegations of fraud and misleading investors. 

The article was updated on 13 November, 2019 by Amicus.

20 August, 2019 | AtoZ MarketsThe New York State Supreme Court has decided that it has jurisdiction to rule over the case between the New York Attorney General (NYAG) and iFinex, the parent company of cryptocurrency exchange Bitfinex.

NYS court rejects Bitfinex’s lack of jurisdiction claim

A motion filed by iFinex during oral arguments in July. It accused the NYAG of not having the proper jurisdiction to conduct the prosecution. However, following a court filing on August 19, the NYAG can now continue its Bitfinex Tether investigation over allegations of fraud and misleading investors.

iFinex had previously appealed to the court to toss the NYAG Bitfinex Tether investigation over its alleged commingling of funds. That is to cover up the loss of $850 million to a payment processor called Crypto Capital and among other issues. In response, the NYAG argued that it was too early for the court to address jurisdictional questions during an ongoing investigation.

The court now repeals such argument, ruling that it indeed can adjudicate the matter. It also denies iFinex’s motion to terminate the NYAG’s Bitfinex Tether investigation. And it rules that the law enforcement agency can carry on its research. According to Cohen:

“The Court disagrees with the Petitioner that it is (or can be) premature for the Court. That is to determine whether it has jurisdiction to issue orders impacting the rights of Respondents in this proceeding. That said, the Court finds based on the evidence and applicable law. That has jurisdiction – and a clear statutory mandate – to adjudicate this matter.”

Bitfinex to produce relevant documents to NYAG

With this latest decision, iFinex has 90 days to turn over relevant documents regarding their relationship and the deal to the NYAG. Furthermore, the stay imposed on the NYAG by the court to prevent it from demanding further documents from iFinex is also eliminated.

In response to the court’s ruling, iFinex and Tether later submitted a notice, appealing a reversal of the decision:

“The trial court lacked personal jurisdiction. Because service was defective. And the Petitioner failed to show that. The Respondents engaged in purposeful activity toward New York. However, the trial court lacked subject matter jurisdiction. Because the cryptocurrency is the focus of the Petitioner’s investigation is neither a commodity or security. It required for jurisdiction under the Martin Act. The trial court incorrectly held that the Martin Act could be applied extraterritorially because of the language of Gen. Bus. L. § 354 does not provide for extraterritorial reach.

Respondents seek a reversal of the Decision and Order on Motion in its entirety.”

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