New York Attorney General Shuts Down Bitfinex And Tether Trading in State; Groups Agree $18.5 Million Fine
Tether #Tether
The State of New York shut down the the digital currency trading platform Bitfinex Tuesday, accusing it of hiding losses and deceiving clients, in a move that could have significant implications for bitcoin prices.
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New York Attorney General Letitia James said Bitfinex claimed its so-called ‘stablecoin’, Tether, was backed by one-for-one holdings in U.S. dollars. However, James said iFinex, the Bitfinex platform operator “made false statements about the backing of the “tether” stablecoin, and about the movement of hundreds of millions of dollars between the two companies to cover up the truth about massive losses”, which it pegged at $850 million.
iFiniex, Tether and related entities were ordered to cease trading and pay $18.5 million in penalties. The groups were also told to increase their reporting and transparency with respect to Tether’s U.S. dollar backing.
“Bitfinex and Tether recklessly and unlawfully covered-up massive financial losses to keep their scheme going and protect their bottom lines,” James said. “Tether’s claims that its virtual currency was fully backed by U.S. dollars at all times was a lie. These companies obscured the true risk investors faced and were operated by unlicensed and unregulated individuals and entities dealing in the darkest corners of the financial system. This resolution makes clear that those trading virtual currencies in New York state who think they can avoid our laws cannot and will not.”
“Last week, we sued to shut down Coinseed for its fraudulent conduct,” James added. “This week, we’re taking action to end Bitfinex and Tether’s illegal activities in New York. These legal actions send a clear message that we will stand up to corporate greed whether it comes out of a traditional bank, a virtual currency trading platform, or any other type of financial institution.”
Bitcoin prices were marked 10% lower on the Coindesk exchange at $48,444.55 each following the Attorney General’s ruling, paring some of the overnight losses that pushed it to a one-week low of just under $45,000. Bitcoin traded at an all-time high of $58, 354 each on Sunday.
Non-related lawsuits filed by crypotcurrency investors in October 2019 have claimed that Tether is being used to manipulate the price of bitcoin.
The allegations say Tether is minted without the one-to-one- U.S. dollar backing, and then used to buy bitcoins on platforms such as Bitfinex. Bitcoin is then sold for U.S. dollars, and the proceeds are deposited into accounts that later confirm the one-to-one backing.
Bitfinex said the case was based on speculation and was “without a single sustainable allegation.”
“The Attorney General’s Office concluded, in essence, that we could have done better in publicly disclosing these events,” Tether said in a statement, adding it admits to no wroongdoing. “Contrary to online speculation, after two and half years there was no finding that Tether ever issued tethers without backing, or to manipulate crypto prices.”
This article was originally published by TheStreet.