The Bitfinex-Tether team is under fire again! The New York Attorney General’s Office has alleged that Bitfinex exchange lost $850 million and used funds from stablecoin operator Tether (USDT) to secretly cover the losses.
In the official announcement, Attorney General Letitia James explained that her office obtained a court order which implicates iFinex Inc – operator of Bitfinex and Tether – for violation of New York laws in connection with activities which amount to defrauding investors.
The filings stated that these transactions, including the losses, have not been disclosed to the investors. It also said that these transactions treated Tether’s cash reserves as Bitfinex’s corporate slush fund.
The order requires both companies to immediately cease dissipation of the U.S. dollar assets which back USDT. In addition, the companies have also been asked for documents and information related to the investigation.
Trouble for USDT
Following the news, USDT had trouble maintaining its 1:1 peg with the US Dollar. Other stablecoins like TrueUSD and USDC benefitted from the news as investors started moving their holdings in these stablecoin alternatives. However, USDT has since recovered and is now trading at $0.993.
$185 Million Withdrawn from Bitfinex Cold Wallets
In a new development, there have been reports that more than $185 million were withdrawn from Bitfinex’s wallets. Large amounts of Bitcoin and Ethereum were moved to unknown addresses, along with a few other cryptocurrencies.
It is not clear whether the funds were moved by Bitfinex or by the platform’s users who lost confidence in the exchange after the New York Attorney General released the order.
Bitfinex and Tether Post Official Response
Both Bitfinex and Tether posted their official response to the New York Attorney General’s allegations on their blog posts. The blog posts claimed that the court filings were written in bad faith and are riddled with false assertions. They have also said that both the companies will vigorously challenge this action by the New York Attorney General’s office.
Cryptocurrency Exchanges need Higher Corporate Governance Standards
Crypto Dost spoke to Ken Lo, CEO of Hong Kong-based BC Group about the implications of the Bitfinex saga on cryptocurrency exchanges. Ken spoke about the need for higher corporate governance standards for the digital asset industry. He also asserted the need for improved internal controls that are verified by a third-party auditor. As an increasing number of professional and institutional traders add digital assets to their portfolios, Ken encouraged traders to confirm three things before transacting with a digital asset platform:
- Company accounts and processes are independently verified;
- Fund transactions are carried out in a secure and clear manner;
- Strong corporate governance practices are in place.