New York appeals court sides with state Attorney General as it seeks documents from Bitfinex and Tether

Quick Take

  • A state appeals court on Thursday sided with the New York Office of the Attorney General as it seeks documents from crypto exchange Bitfinex and stablecoin operator Tether amid an ongoing investigation
  • “The trial court properly rejected the attempts by respondents to limit petitioner’s lawful authority to protect New York residents,” the ruling stated.
  • Bitfinex told The Block: “We have read the decision issued today by the Appellate Division of the New York Supreme Court, First Department. As we have at all times in this process, we will respect the court’s order. We have no further comment on this matter at this time.”
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A state appeals court sided with the New York Office of the Attorney General on Thursday as it seeks documents from crypto exchange Bitfinex and stablecoin operator Tether amid an ongoing investigation.

The NYOAG and Bitfinex and Tether parent company iFinex have been locked in legal proceedings since April of last year, when the NYOAG brought allegations that iFinex commingled funds, using Tether to cover up an $850 million loss for Bitfinex. At the time, Bitfinex blasted the AG's efforts and vowed to fight them.

Ultimately, the AG's office obtained a court order from the New York Supreme Court that compelled the crypto companies to produce documents related to the case, which Bitfinex initially refused to supply. The order also sought to compel Bitfinex to halt any activities to prevent further cash reserve depletion.

Bitfinex later moved to appeal the initial court ruling, arguing the NYOAG did not have the power to investigate the company and demand documents since the exchange didn't have sufficient contacts in the state. In September, the Supreme Court's appellate arm granted a request for a stay of that order, setting the stage for additional back and forth between the two sides. 

In Thursday's ruling, the appeals court judges said:

"This case raises important issues about the scope of the authority of petitioner, the Attorney General of the State of New York, to investigate fraud under the Martin Act. The trial court properly rejected the attempts by respondents to limit petitioner's lawful authority to protect New York residents."

When reached for comment, Bitfinex general counsel Stuart Hoegner told The Block: "We have read the decision issued today by the Appellate Division of the New York Supreme Court, First Department. As we have at all times in this process, we will respect the court's order. We have no further comment on this matter at this time."

The ruling, included below, shot down the argument that the NYAOG lacked the proper jurisdiction to request the documents in question.

The NYAOG had previously filed a response through the appellate court in December, arguing it had broad powers to investigate under New York's Martin Act. The Martin Act broadly empowers investigators in cases of potential securities and commodities fraud.

The full court ruling can be found below (beginning on page 98):

2020_07_09_dec by MichaelPatrickMcSweeney on Scribd


© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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