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Bitfinex and Tether respond to NYAG in court saying that there is no ongoing fraud, and no victims

Quick Take

  • Bitfinex and Tether moved to vacate the ex parte order “because it was issued based on incomplete or incorrect facts and the wrong legal standard”
  • Bitfinex and Tether argue “there was no ongoing fraud, and no “victims” in need of the drastic remedy of an injunction to protect them”
  • They argue that NYAG first needs to establish the basis for its authority “to even regulate in this sphere” and require Tether and Bitfinex to “address blunderbuss document demands”

The parent company of Tether and Bitfinex has issued its official court response to the allegations made against it by the New York Attorney General’s Office two weeks ago.

iFinex has moved to vacate the court order, which alleged that the companies engaged in a cover-up to hide an alleged $850 million loss of co-mingled client and corporate funds, arguing that the order “was issued based on incomplete or incorrect facts and the wrong legal standard.” To be clear, Bitfinex has addressed the NYAG’s claims in other statements, but the court order released May 5 offers more insights into the case. 

For starters, Bitfinex and Tether argue that “there was no ongoing fraud, and no “victims” in need of the drastic remedy of an injunction to protect them.” 

In the document, iFinex says that New York Attorney General does not even explain how Tether (USDT) qualifies as a security or a commodity covered by the Martin Act, which would properly establish the agency’s authority over the firm. iFinex says that NYAG would need that basis of authority “to even regulate in this sphere” and require Tether and Bitfinex to “address blunderbuss document demands.”

Moreover, iFinex argues that the injunction is “hugely disruptive” because it freezes in place more than $2 billion of Tether’s reserves and prohibits any investment of any kind “into the indefinite future.” iFinex says that the “massive regulatory overreach has no corresponding benefit” because there was no fraud and “much less harm that is either ongoing or irreparable.”

The filing adds that Tether disclosed its reserves could consist of loans to affiliates before the line of credit transaction and that USDT holders were free and able to redeem or sell their tethers at any point (including now). Tether claims that it “has ample reserves to meet the demand.” Moreover, iFinex says that it doesn’t have a duty to inform their customers of all matters customers “would find material.”

IFinex also points out that NYAG misuses of the term “investor” when talking about customers of Bitfinex and Tether, who are not investors, and “who not entitled to disclosure as if they were.” Moreover, the company said that “Tethers still trade at par to this day, despite this proceeding.”

Bitfinex and Tether argue that a preliminary injunction “would not protect anyone but would instead cause great disruption to Bitfinex and Tether.”