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U.S. Court orders Tether to stop loans to Bitfinex

Maya Mandz | May. 17, 2019
U.S. Court orders Tether to stop loans to Bitfinex

May 17, 2019 | AtoZ Markets - New York City Supreme Court, restricted Tether Ltd, from using its reserves to cover its partner’ Bitfinex $850 million losses. The order from the U.S. court comes after the recent litigations, that involved cryptocurrency exchange and Tether Ltd which were accused of using tether funds in an unethical way.

Bitfinex, Tether Ltd and NYAG - never-ending litigations

In April 2019, Crypto Capital’s managers, Ravid Yosef, and Reginald Fowler were indicted by the US Department of Justice (DoJ) for allegedly offering illicit banking services to various crypto-related firms.

It was reported that the New York Attorney General’s office (NYAG) alleged that Bitfinex had “engaged in a cover-up to hide the loss of $850 million in client and corporate funds”.

Bitfinex responded to NYAG allegations, by saying, that aforementioned funds were not lost but, “seized and safeguarded,” by the governmental authorities, including the U.S.

Supreme court orders Tether Ltd to freeze transfers to the Bitfinex exchange

An ongoing Bitfinex financial scandal has taken another turn when a day ago, the New York Supreme Court released an order which restricted the crypto exchange and Tether Ltd employees from loaning Tether’s reserves to Bitfinex.

In addition in the official document, Judge Joel M. Cohen has ordered both firms to submit documentation regarding the issuance of a loan and a line of credit.

The media reports that Tether Ltd., the issuer of the stablecoin, USDT, had extended a line of credit to Bitfinex so that the exchange operator could maintain its business operations - after losing $850 million. According to Bitfinex representatives, those funds were seized by the governmental authorities n Portugal, Poland, and the US.

Tether, however, was allowed to continue to conduct normal business activities, pay its employees for any work done that is related to the company’s day-to-day, or normal, business operations.

Bitfinex responses to the U.S. authorities

According to the New York Supreme Court document the order will expire in 90 days, but the authority may file a petition in order to extend the deadline. Court papers also state that Bitfinex and Tether’s management are not allowed to make any changes to the loan documents that the regulator has requested. In response to the Judge’s orders, Bitfinex stated:

We believe that the court’s decision today leaves no doubt that both Tether and Bitfinex are entitled to run their businesses in the ordinary course, even during the short period when this now narrowed preliminary injunction is in place.

The exchange further noted:

We will vigorously defend against any action by the New York Attorney General’s office, and we remain committed, as ever, to protecting our customers, our business, and our community against their meritless claims.

It worth to mention, that recently the Bitfinex representatives announced, that Bitfinex IEO raised $1 billion in a just 10 days during the private token sale. Will the Supreme Court of New York have an opinion on this Bitfinex activity and what fate awaits the funds raised?

Think we missed something? Let us know in the comment section below.

Disclaimer: The views and opinions expressed in this article are solely those of the author and do not reflect the official policy or position of AtoZ Markets.com, nor should they be attributed to AtoZMarkets.