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Blocktempo.com reported. According to the legal documents obtained, the company Tether of the stable currency USDT and the management of its related company Bitfinex acknowledged that the company had invested in bitcoin and other cryptocurrencies with a partial USDT reserve.

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Another dispute over the stabilization of USDT's company Tether and its affiliates, according to the New York Supreme Court hearing document, the company's appointed lawyer, David Miller, admitted that the company would have been 100% cash. Reserve USDT reserve for investing in Bitcoin and other cryptocurrencies. It is not the first controversy between Bitfinex and Tether.

The exchange Bitfinex was founded in Hong Kong in 2012. Bitfinex initially used the Bitcoin P2P margin lending platform as its core service, and later added a cryptocurrency trading service.

In 2014, Bitfinex created its subsidiary Tether and issued a stable USDT that anchored the dollar price, claiming a 100% reserve, so Bitfinex and Tether took a pivotal role in the cryptocurrency market. And because there is no endorsement of legal documents, although Tether claims that they have 100% cash reserves, there are rumors and news that the company does not have a 100% reserve.

According to Bloomberg, Bitfinex's price manipulation of bitcoin accounted for about half of the increase in bitcoin prices in late 2017, and the community has long questioned whether Tether has a 100% reserve.

In April 2019, Bitfinex was sued by the Office of the Attorney General of New York, alleging that Bitfinex illegally misappropriated the USDT reserve of its affiliate Tether.

According to previous reports, Bitfinex needed to be illegally diverted because its shadow bank Crypto Capital was frozen, causing the exchange to lose as much as $800 million. Bitfinex was unable to repay it and illegally diverted the US dollar reserve from Tether to fill the funds. gap.

In the entire lawsuit, the details of Bitfinex's business operations were slowly revealed.

In March 2019, Tether revised the terms of service on the website, announcing that in addition to the dollar anchor, it may also be secured by iFinex stock loans or accounts receivable, or with reserve assets, which opens Tether can Borrowing to Bitfinex, and using this as a reserve guarantee.

Later, Bifinex was found to have a reserve of only 74% for the stable currency USDT issued by Tether.

Have used Reserve to buy Bitcoin?

According to a record of the court hearing on May 16, Bitmillx's appointed lawyer, David Miller, said,

Before April 24th, Tether did have assets other than cash, including bitcoin, and they bought bitcoin.

At the time, the New York Attorney General’s Office hoped that Tether’s investment would be limited to cash or cash equivalents because they “don’t like some of Tether’s investment,” and Miller protested, claiming that the Attorney’s Office’s move had exceeded Scope of supervision.

However, Joel M. Cohen, a Supreme Court judge in New York, questioned this logic and pointed out that the stability of the coin investment compared to the unstable assets of the special currency, such logic has a stable reserve system. He said,

Tether sounds like a typhoon in the storm of password currency trading. If Tether's reserves have bitcoin, how do they stay stable? If your reserve assets have some highly volatile assets, Tether should make adjustments, which is consistent with the prosecutor's argument.

Bitfinex's appointed lawyers clarified that such assets accounted for only a small amount and were already publicly available. In particular, on February 25th, Tether had not only disclosed cash or cash equivalents as reserves, but also included Other investments, borrowings or purchasing other assets.

After the court hearing on May 16, the judge allowed Tether to make a partial non-cash investment in its reserves, but also issued a preliminary injunction requiring Tether and Bifinex to:

  • Limit Tether's credit line to hold US dollar reserves.
  • Bitfinex's principals and executives are not allowed to receive bonuses or dividends from Tether's revenue.
  • The initial injunction that Tether followed initially required by the Office of the Attorney General of New York must not be changed.

The initial ban is valid for 90 days and the New York Attorney General's Office can apply for an extension of 14 days.

After Bifinex was banned from having money with Tether in early May, Bitfinex issued an exchange token, LEO, to raise funds, claiming to repurchase the token with a partial profit per month. It has successfully raised nearly $1 billion in private placements to fill the $850 million that Crypto Capital has frozen. As of the deadline, the token was quoted at Bitfinex for $1.07.
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