New York AG Finds It 'Perverse' For Bitfinex and Tether to Criticize Investigation

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In a filing with the New York State Supreme Court's Appellate Division, New York Attorney General Letitia James roundly criticized the efforts of Bitfinex and Tether to halt her office's investigation into the companies.

Bitfinex and Tether are under investigation for an accounting coverup in which Bitfinex is alleged to have improperly transferred $625 million that had been backing the Tether stablecoin in order to conceal Bitfinex's liquidity shortfall.

In the filing from Dec. 4 but made public on Dec. 12, Attorney General James wrote that Bitfinex and Tether are attempting to stop the "Ongoing investigation by the Office of the Attorney General into potential securities and commodities fraud."

Lawyers for Bitfinex and Tether responded in a filing today, saying that the NYAG does not have authority to investigate the companies because "Tethers are not securities or commodities."

Bitfinex and Tether continue to evade court order?James continued by saying that it has now been more than eight months since the court-issued order compelling the Bitfinex and Tether to produce documents relevant to the investigation.

According to James, Bitfinex and Tether continue to evade the court order and have not yet produced the core materials that would either establish or disprove their liability.

Bitfinex and Tether say crypto customers know the risks of investmentIn their filing, lawyers for Bitfinex and Tether lawyers also made the provocative argument that, because the companies are private, they do not need to inform customers of risks to their deposits, despite claiming that Tether had been "Fully backed" by reserves of US dollars.

The current legal battle began when Attorney General James alleged that Bitfinex, parent company iFinex and Tether Limited, and their associated entities violated New York law in connection with activities that may have defrauded New York-based crypto investors.

The NYAG said that Bitfinex borrowed $850 million from Tether to cover a loss that it never disclosed to investors.

Crypto Capital had, in Bitfinex's own words, "Processed certain funds for and on behalf of Bitfinex for several years." However, Bitfinex has argued it was itself a victim of fraud when Crypto Capital either refused to or was unable to make available $850 million of Bitfinex's deposits.