New York County Courthouse, scene of crypto's Bonfire of the Sanities (via Pixabay).
Tether

Tether and Bitfinex win stay of NY Attorney General’s fraud suit

An appellate court will revisit the question of whether Attorney General Letitia James has standing to sue the stablecoin issuers and cryptocurrency exchange

The parent of cryptocurrency exchange Bitfinex and stablecoin issuer Tether have finally won a round in its battle with New York Attorney General Letita James.

On September 24, a New York appeals court stayed a lower court’s order that would have forced iFinex and its subsidiaries to turn over documents to help the attorney general’s fraud and securities law suit.

That civil case grew out of a $900 million line of credit and loan of up to $700 million Tether secretly gave Bitfinex. The exchange faced insolvency after losing $850 million to an alleged con man in 2018. The lawsuit forced the disclosure of the loan, and highlighted the fact that tether (USDt)—by far the largest stablecoin—was no longer backed one-to-one with a reserve of U.S. dollars. 

While the case has generated dozens of motions and decisions, so far they have been largely limited to whether or not James has standing to sue iFinex, Bitfinex, and Tether. The companies are not located in New York, and Bitfinex bans New York residents from using its exchange. The attorney general’s office has argued that the company does in fact have New York customers, including retail customers and institutional clients.

On August 19, New York Supreme Court Justice Joel Cohen ruled that James does have jurisdiction to sue the companies. This decision has been stayed, with a November 4 deadline for both the companies and the attorney general’s office to file arguments.

Even if the Appellate Court does uphold Judge Cohen’s order—and New York’s highest court does not hear an appeal from either side—the case is a long way from a conclusion, as the attorney general’s office is still seeking documents it said it needs to continue the investigation. In early August, Bitfinex and Tether told the court that they had already spent $500,000 defending themselves, and that the investigation and case could cost it $5 million.

Leo Jakobson, Modern Consensus editor-in-chief, is a New York-based journalist who has traveled the world writing about incentive travel. He has also covered consumer and employee engagement, small business, the East Coast side of the Internet boom and bust, and New York City crime, nightlife, and politics. Disclosure: Jakobson owns no cryptocurrencies.

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