Judge Locks Tether Funds from Cryptocurrency Exchange Bitfinex as NY Lawsuit Advances

Bitfinex and Tether Crisis

The cryptocurrency exchange owned and operated by iFinex Inc, Bitfinex, is still blocked from all monetary transactions with regard to its Tether (USDT) stablecoin reserves due to the ongoing lawsuit led by New York Attorney General.

Letita James, the state’s top prosecutor, has accused both the cryptocurrency exchange Bitfinex as well as the stablecoin Tether for violating New York’s law through activities that have allegedly swindled many crypto investors in the State. The Attorney General sued the company in April, claiming that Bitfinex held access to a sum amount of $850 million of Tether’s cash reserves reasoning that it was done to conceal losses from investors and to cloak Bifinex’s inability to process client’s withdrawls.

In response, Tether and Bitfinex released the following statement:

“The New York Attorney General’s court filings were written in bad faith and are riddled with false assertions, including as to a purported $850 million ‘loss’ at Crypto Capital.”

The crypto firm behind the exchange and the stablecoin, iFinex, claims that the amounts under question are not lost but have actually been seized and safeguarded. “We are and have been actively working to exercise our rights and remedies and get those funds released.” Both entities claim that they fully cooperated with prosecutor Letita James and her Office to “focus its efforts on trying to aid and support our recovery efforts.”

The Bitfinex-Tether joint statement claims the Letita’s office “seems to be intent on undermining efforts” to release the company’s funds and warned that this would be detrimental to their customers.

Injunction Restricting Access to Tether has been Extended

Justice Joel Cohen, New York State Supreme Court Justice, extended an injunction he had issued in April, where he blocked Bitfinex from making any claim on Tether’s cash reserves after considering a bid to dismiss the case altogether

iFinex, the company in charge of both the accused, has requested Cohen to dismiss the case and throw out the suit, claiming that New York has no jurisdiction in the matter due to the fact that U.S residents aren’t even allowed to make any sort of transactions and trade on Bitfinex, which is headquartered in Hong Kong and registered under the British Virgin Islands.

The litigation has heavily impacted the affiliated companies as they have now been restricted almost hermetically from using these funds. How this case unfolds could also have great impact on the broader crypto community as it may define standards of legislation in the future for many scenarios that have never been seen before.

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