The New York Attorney General’s Office (NYAG) announced on Tuesday, 23, that it had accepted an agreement to close the investigation against the Bitfinex exchange and Tether, responsible for the USDT stablecoin. The lawsuit, which has been going on since mid-2019, will be closed with a fine of $ 18.5 million (about 101 million reais) and closure of the commercial operations of companies in the state of New York, among other measures.
“An agreement with iFinex, Tether and all of its related entities will require the cessation of any commercial activities with New Yorkers, as well as compel companies to pay $ 18.5 million in fines, in addition to requiring a series of measures to increase its transparency “, says NYAG document with the announcement of the agreement.
The NYAG investigation began in April 2019, when the prosecution claimed that Bitfinex used funds from Tether to cover up the loss of $ 850 million in an unregistered and fraudulent transaction. The lost funds would have triggered problems of withdrawal of values by clients of the brokerage in late 2018. “An investigation by the attorney general’s office found that iFinex – Bitfinex’s operator – and Tether made false statements about stablecoin’s support “tether” and the movement of hundreds of millions of dollars between the two companies to cover up the truth about Bitfinex’s massive losses “, the text says.
The statement further states that the deal is part of NYAG’s efforts to “protect investors from fraudulent and misleading virtual currency trading platforms or cryptocurrencies” and says Tether has no reserves to support its digital currency – in theory, since each USDT is equivalent to the dollar, Tether should save 1 dollar for each USDT issued.
According to Attorney General Letitia James, this never happened: “Tether’s claims that its virtual currency was fully backed by dollars have always been a lie. These companies omitted the real risk that investors faced, and were operated by unlicensed and unregulated individuals and entities that dealt with the darkest corners of the financial system. “
Also as part of the agreement, companies will not need to admit irregularities, but will be required to send quarterly reports describing the composition of tether reserves over the next two years. Jason Weinstein, a lawyer for Bitfinex and Tether, said in a statement that NYAG’s findings are “limited only to the nature and timing of certain disclosures” and that “contrary to speculation, there was no discovery that Tether issued USDT without ballast or to manipulate crypto prices “.
The $ 18.5 million that companies are expected to pay as a fine in the deal “should be seen as a measure of the desire to leave this issue behind and focus on business,” said Bitfinex and Tether General Counsel Stuart Hoegner , in a statement.
Risk to the crypto market
The investigation against Tether and Bitfinex was seen by analysts and investors as a big risk for the crypto market, since a very significant part of the buying and selling operations of bitcoin and other cryptos is carried out with USDT, which, having its value pegged to the dollar, facilitates negotiations.
If the investigation were carried out and turned into a legal process, experts say, a possible conviction could not only raise doubts about the functioning of the market, but also about the suitability of the largest crypto projects in the world.
In addition, due to the terms of the agreement, market participants will be able to have access to information about Tether clearly, clarifying doubts that hover over the company. With a higher level of transparency, it will be possible to assess objectively whether in fact the company has support for all USDTs issued, something that has been questioned for a long time by a number of people and entities. This, however, can still impact the market.
“Despite representing an important step in resolving the ‘Tether case’, the soap opera is still far from over. The requirement to publish periodic reports brings more transparency, but the action only prohibits the involvement of companies linked to Bitfinex and Tether with New York citizens. Much of the money from Tether comes from Asia, so the risk must be kept in the account when investing in crypto, “commented Nicholas Sacchi, head of EXAME crypto.