New York Attorney General Letitia James claims virtual asset trading platform Bitfinex and cryptocurrency issuer Tether Limited committed ongoing activities that may have defrauded investors.
"Our investigation has determined that the operators of the Bitfinex trading platform, who also control the tether virtual currency, have engaged in a cover-up to hide the apparent loss of $850 million dollars of co-mingled client and corporate funds," Ms. James said.
Court documents suggest Betfinex, which the tether coin was traded on, did not disclose how it no longer had access to over $850 million in funds that it allegedly handed over to a Panamanian entity. Tether and Betfinex are accused of engaging in a series of conflicted transactions that gave Bitfinex access to up to $900 million of Tether's cash reserves.
Bitfinex has allegedly taken at least $700 million from Tether's reserve. These transactions were not disclosed to investors, the attorney general claims. Ms. James alleges that Tether's cash reserves served as a corporate slush fund for Bitfinex to hide massive, undisclosed losses.
Tether allegedly told investors it fully backed its cryptocurrency one-to-one in U.S. dollars.