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Op Ed: Summary of NYAG vs. Bitfinex / Tether


In the latest on ongoing legal disputes between New York Attorney General (NYAG), the exchange of Bitfinex cryptocurrency and publisher Stablecoin Tether, the New York Supreme Court has modified orders 24 April 2019, initial orders and now Bitfinex is allowed to continue to use the loaned Tether reserve him to maintain his usual business, such as paying employees and consultants. But Bitfinex cannot withdraw further funds from the Tether reserves and must comply with all document requests in accordance with the NYAG investigation. This modified initial command takes effect on May 16, 2019, and will last for 90 days.

History of Disputes

On April 24, 2019, the Office of the Supreme Court of the State of New York, the Commercial Division gave an order submitted by the Office of the Prosecutor General (OAG) which required Bitfinex / Tether to provide information based on the Martin Act. The court gave an initial court order restricting Bitfinex / Tether from further violations of the Martin Act including engaging in "fraudulent, deceptive, or illegal acts," and "using any device, scheme or intelligence to cheat or obtain money or property by means of fake pretense, representation, or promise. "

Bitfinex / Tether objected that OAG did not give a warning, even in close communication with them, and asked the court to modify the order. There was a hearing on May 6, 2019, and the court found that Bitfinex / Tether needed to produce some more evidence but agreed that the initial court order must also be modified.

The main concern raised by the court was that, on February 21, 2019, OAG learned that Bitfinex was contemplating a transaction that would allow Bitfinex to utilize Tether's cash reserves on an as needed basis. OAG has serious concerns about the survival of Bitfinex and whether "borrowed" money can be repaid to Tether reserves. Bitfinex / Tether ignored this concern and made a document for the $ 900 million credit line with Tether reserves and notified OAG two days later, on March 29, 2019. Apparently, $ 625 million has been borrowed again in November 2018, becoming a credit line document this seems to be an attempt to get consecutive ducks after the fact. The loan left Tether with $ 150 million in reserves and NYAG suspected that this could be removed at any time. Bitfinex / Tether insisted that it was a reasonable and reasonable transaction.

This resulted in the 24 April 2019, the court ordering the production and order of documents, prohibiting Bitfinex from accessing Tether reserves for any reason.

It seems that the court has received many requested documents from Bitfinex / Tether, which is the main purpose of placing the order. So, on May 16, 2019, the court modified the order. The court noted that the power of his orders through New York Business Law and The Martin Act was limited beyond the scope of forcing the production of documents: "[the applicable law] does not provide a traveling mandate to regulate commercial activities based on the subject or target of the investigation of the Martin Law. "

The court found that NYAG made enough appearances to meet the very high standards needed for an initial court order that would prevent Bitfinex / Tether from continuing to let the dollar flow out of Tether's reserves while the investigation continued. The court revised the preliminary order to achieve a balance between protecting the public and protecting Bitfinex / Tether from undue business restrictions. Temporary temporary orders were found to be unclear, overbroad and not temporary because they did not have an endpoint. This prevents Bitfinex / Tether from "further legal violations or committing fraud."

Orders May 16

The court ordered a preliminary order not to detain Bitfinex / Tether from ordinary business activities. Now Bitfinex / Tether and its agents are banned

  • Every Tether backup use by Bitfinex
  • Distribution or dividends to one of Bitfinex / Tether's high-level partners using funds that have been borrowed from Tether reserves (this does not include payments in ordinary business activities, such as payroll, payments to vendors, consultants, contractors, etc.)
  • Directly or indirectly damage or destroy evidence (including a long list of documents / communications) or other information requested by NYAG on November 27, 2018, or February 26, 2018, (this may be a typo, I think the court intended 2019) request for documents.

This preliminary order will take place for 90 days starting from May 16, 2019.

Meanwhile, Bitfinex seems to have collected $ 1 billion personally for 10 days, according to its CTO, Paolo Ardoino, on Twitter.

This is an operation by Sasha Hodder. The opinions expressed are their own and do not reflect the opinions of Bitcoin Magazine or BTC Inc.

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