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New York prosecutor’s office accused Bitfinex of concealing the fact of the loss of $ 850 million using Tether funds

New York prosecutor's office accused Bitfinex of concealing the fact of the loss of $ 850 million using Tether funds

New York prosecutor’s office accused Bitfinex of concealing the fact of the loss of $ 850 million using Tether funds

The New York prosecutor’s office accused the crypto exchange Bitfinex of concealing the fact of the loss of $ 850 million with the help of the funds of the stablecoin issuer Tether affiliated with it, writes CoinDesk with reference to the press release of the department.

New York Attorney General Laetitia James announced that she has received a court order against iFinex Inc., which operates Bitfinex and Tether, to stop violating New York laws and misleading local residents..

James spoke about the prosecutor’s investigation, during which it was found that iFinex “was involved in operations to cover up the alleged loss of $ 850 million, which belonged to both the company and its clients.”.

“New York State has taken a leadership role in getting virtual currency companies to comply with the law. We continue to protect investors and pursue fairness in their interests when we find cases of fraud by any of these companies, ”said James.

According to the prosecutor’s office, Bitfinex transferred $ 850 million of corporate and client funds to the payment company Crypto Capital Corp., which supposedly holds the assets of other representatives of the cryptocurrency sphere, including the bankrupt QuadrigaCX exchange. Tether’s reserves were used to fill the deficit, but this information was not disclosed to customers. It is assumed that for these purposes at least $ 700 million was borrowed from Tether.

According to a document prepared by Assistant Attorney General Brian Whitehurst, the audit was initiated in 2018. “The Attorney General’s Office has reason to believe that Bitfinex continues to allow individual investors in New York to make deposits, trade and withdraw funds in virtual currencies, and engage in other activities on its platform, “Whitehurst said. Bitfinex announced last year that it will no longer serve New York clients..

In accordance with the court order, iFinex executives of various ranks, agents, employees, representatives and other affiliated persons are required to stop accessing, borrowing and in any other way claiming funds in Tether reserves, and also cannot make any changes to documents related to these events.

Bitfinex started having problems with paying out funds to clients in October 2018. The prosecutor connects them with the refusal of Crypto Capital to return to the exchange its funds..

On October 15, Bitfinex issued a statement: “It is important to clarify the following: the withdrawal of cryptocurrencies and fiat takes place in a standard manner without the smallest violations. All requests for fiat withdrawal are carried out as usual “.

The Block recalls that at the same time, Bitfinex was experiencing serious problems with payments to customers. One of her top managers, in internal correspondence with third-party payment partners, allegedly stated: “Please understand, this can be extremely dangerous for everyone, for the entire cryptocurrency community. BTC could drop below 1k if we don’t act quickly “.

Representatives of Bitfinex and Tether told the prosecutor that the payment company called them “confiscation” by the authorities of Portugal, Poland and the United States as the reason for the withholding of funds. According to published documents, the exchange does not believe in this version..

“During a personal meeting on February 21, 2019, a Bitfinex and Tether lawyer explained that in order to make up for the $ 851 million loss due to the actions of Crypto Capital, Bittinex and Tether were considering the possibility of granting Bitfinex permission to gain access to Tether’s fiat reserves as needed, ”says publications. – As the lawyer explained, Bitfinex received a “credit limit” of $ 600 million to $ 700 million, paid out of the reserve funds used to secure Tether. What benefit from this operation should have been received by Tether or the holders of its tokens, the lawyer did not say. He also did not say whether companies were going to disclose this information to the public, including investors who traded on the Bitfinex platform and Tether holders. “.

Bitcoin reacted negatively to this news and lost more than 5% of its value in an hour.

UPD: Commenting on the allegations, Bitfinex said they were based on false facts, including the reported loss of $ 850 million due to the actions of Crypto Capital. “On the contrary, we were informed that the amount in the possession of Crypto Capital was not lost, but confiscated and safe,” the company writes. – Both Bitfinex and Tether are financially strong – period. Both Bitfinex and Tether intend to counter this widespread exaggeration from prosecutors to companies that adhere to the rules of corporate ethics and provide all-powerful support to law enforcement agencies. Bitfinex and Tether will vehemently dispute this and any other actions of the prosecutor’s office “.

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