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NYOAG: Bitfinex’s motion to dismiss is a “delay tactic”


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The New York Attorney General's office has hit back against iFinex's motion to dismiss.

The New York Office of the Attorney General (NYOAG) vs iFinex (Bitfinex and Tether) case is still in motion.


To recap, in April 2019, it emerged that the NYOAG had been investigating iFinex (which we'll broadly refer to as Bitfinex for the sake of simplicity) for various things.

The main detail to emerge from the case was that over $850 million of Bitfinex funds was held up with one of Bitfinex's payment partners, and Bitfinex borrowed money from its affiliate, Tether, to cover the shortfall.

This was significant because the borrowing left the Tether USDT stablecoin about 70% backed, rather than 100% backed. Due to Tether's central position in the crypto market, people were concerned that these findings would cause Bitcoin prices to collapse. But crypto being what it is, the findings actually came as something of a relief to many market participants, many of whom had long suspected that Tether was much less than 70% backed.

Regardless, NYOAG attempted to clamp down on Bitfinex and Tether through a court order, alleging that investors had been misled and were at risk. NYOAG asked the courts to order that iFinex do the following:

  1. Hand over a range of information to the NYOAG
  2. Severely limit its business activity until the completion of the case

The general opinion of market-watchers was that the second order could have strongly impacted the crypto markets, which is why everyone has been watching the proceedings with such interest.

However, in its counter-arguments, Bitfinex was able to take the second order largely off the table. Then, in late May, it tried to get the case dismissed entirely.

The courts have now responded to that attempted dismissal of the case.

New developments

The court has sided with the NYOAG on this one and has not dismissed the case, according to new filings.

Bitfinex's motion for dismissal hinged on two points:

  1. It argued that it had stopped serving New York-based traders, and therefore the case was outside the NYOAG's scope of responsibility.
  2. It argued that the Martin Act – the law under which the NYOAG was pursuing the case – does not apply to Tether.

These are the two points that the NYOAG is now aiming at.


First, the NYOAG has claimed that Bitfinex kept serving New York-based customers longer than it claimed, which it says refutes the first point.

"Respondents had, and continue to have, clients located in and doing business from New York; Respondents held accounts with two New York banks and at least one other New York-based financial institution during the relevant time period, which they used to transfer money to and from clients of the Bitfinex and Tether platforms; one of Respondents' most senior executives resided in and conducted work from New York for several years; Respondents have repeatedly engaged New York firms to assist them in their business objectives, including to make statements to the markets about the operation of the Bitfinex trading platform and the cash backing of tethers; and as recently as 2019, Respondents opened a trading account with at least one New York-based virtual currency firm.

"Contrary to Respondents' statements to the Court that '[t]hey have steered clear of New York (and of the United States)', their ties to New York are many and deep," the OAG response says.

Second, the NYOAG argues – with trace amounts of snark – that the Martin Act is perfectly valid in this case.

"The Office of the Attorney General ('OAG') has now twice demonstrated that its investigation into Respondents' practices is appropriate under the Martin Act, and so the Court should decline Respondents' invitation, styled as a 'motion to dismiss', to require the OAG to do so a third time," it said.

The NYOAG also argues that the entire motion to dismiss is an "improper attempt to impede a lawful investigation", and that even if it wasn't, Bitfinex already had its chance to argue for a motion to dismiss when it first hit back against the NYOAG's requests.

"Respondents chose to assert their right to review of the 354 Order when they moved to vacate it on procedural and substantive grounds," the NYOAG argued. "This Court granted (in part) that motion, and denied it in other respects. Respondents should not now have a second bite at the apple, styling another challenge in the guise of a 'motion to dismiss'. This is a delay tactic. The investigation should not be delayed further. Respondents must produce all the materials as they have been directed, since April, to do."

The NYOAG also points out claims of business disruption notwithstanding, 1.5 billion Tethers have been printed, and Bitfinex has pulled off a successful IEO with the LEO token.

The upshot

The upshot is that "the OAG respectfully requests that the Court deny this 'motion to dismiss' in its entirety, direct Respondents to produce, without further delay, documents and information as required in the 354 Order, and inform the parties of the process by which it will hear the OAG on an extension of the injunction."

Among other things, the 354 Order requires that Bitfinex hand over a range of tax records, all information on customers or Tether users that Bitfinex believes reside in New York and documents relating to Tether issuances or burns from January 2019 onwards. It also requests that Tether hand over reports at least weekly that provide information on the customers performing Tether issuances or redemptions, and aid the NYOAG by providing all other pertinent information requested.

It also asks that iFinex essentially refrain from touching the Tether reserves except to the extent that they are needed to legitimately serve customers.

For anyone playing the home game, and trying to gauge the potential market impact of the court's response to the latest NYOAG request, a good starting point may be to look at what's requested by the 354 Order, and ask whether it would cast a damper on the current cryptocurrency market exuberance.

Also, get some popcorn.

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Disclosure: The author holds BNB and BTC at the time of writing.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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