May 13, 2021

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Tether, Bitfinex Agree to Pay $ 18.5 Million Penalty After New York Investigation

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Cryptocurrency Tether and Bitfinex exchange agreed to pay a fine of $ 18.5 million after the New York attorney general accused them of covering “massive” financial losses.

Groups at the center of one of the most high-profile U.S. investigations into the cryptocurrency industry have also been banned from operating in New York, according to a regulation revealed Tuesday by Letitia James, the state attorney general.

Tether, a so-called stablecoin purported to be pegged to the price of a dollar, and cryptocurrency trading platform Bitfinex, covered up the loss of around $ 850 million, then later made a “false statement.” Indicating that the funds were “protected,” James said Tuesday.

“Bitfinex and Tether recklessly and illegally hedged massive financial losses to keep their plan going and protect their bottom line,” James mentionned.

“Tether’s claims that its virtual currency was fully backed by US dollars at all times were a lie,” she added. “These companies masked the real risk investors faced and were managed by unauthorized and unregulated people and entities, operating in the darkest corners of the financial system.

The investigation revealed that, by mid-2017 at the latest, Tether “had no access to banking services anywhere in the world, and therefore held no reserves for periods of time to support the Tethers in circulation at the rate. of a dollar for each Tether, contrary to its representations. ”

The settlement said Bitfinex in 2018 lost access to approximately $ 850 million held in a Panama-based entity known as Crypto Capital, which caused the exchange to experience “critical liquidity issues.” Bitfinex made up for the shortfall by “transferring hundreds of millions of dollars from Tether,” according to the settlement.

“At no point did Bitfinex or Tether reveal to the market that Tether transferred at least $ 625 million to Bitfinex, or that Bitfinex experienced critical liquidity issues due to a loss of around $ 850 million to Crypto Capital, “the regulation says.

Tether is one of the most successful cryptocurrencies and acts as an important link between the traditional currency market and digital tokens, as each unit is said to be worth a dollar.

The amount of tether in circulation has increased as cryptocurrency trading has grown rapidly over the past few months. According to the CoinMarketCap website, nearly 35 billion units of the so-called stablecoin are in circulation.

Tether and Bitfinex are “owned and operated by a small group of officers and shareholders located around the world,” according to the regulations.

The groups said on Tuesday they “do not admit any wrongdoing.”

“The settlement resolves allegations of public disclosures related to a Bitfinex-linked loan when Bitfinex was having difficulty accessing approximately $ 850 million of Bitfinex funds held by a payment processor in 2018,” they added.

“The loan was granted to ensure the continuity of Bitfinex customers. It has since been redeemed early and in full, including interest. At no time did the loan affect Tether’s ability to process redemptions. “

Bitcoin’s price reacted little to Tuesday’s settlement and traded more than 10% less that day at less than $ 49,000.

Additional reporting by Eva Szalay



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