Tether Ltd. Restricted from Using Its Reserves By NYAG

New York Supreme Court Judge Joel M. Cohen has ordered digital asset exchange Bitfinex and Tether Ltd. to submit documentation regarding the issuance of a loan and a line of credit.

Tether Ltd., the issuer of the world’s most dominant stablecoin, USDT, had reportedly extended a line of credit to Bitfinex so that the exchange operator could maintain its business operations - after losing $850 million. As reported, the funds were being managed by Crypto Capital Corp., a Panama-based payments processing service provider. However, Crypto Capital has claimed its funds (under management) were seized by authorities in Portugal, Poland, and the US.

In April 2019, Crypto Capital’s managers, Ravid Yosef and Reginald Fowler, were indicted by the US Department of Justice (DoJ) for allegedly offering illicit banking services to various crypto-related firms.

“Legitimate Law Enforcement Concerns” Should Be Addressed

Last week, a preliminary hearing on the matter had been held in New York City and an opinion released on Thursday (May 16th, 2019) had ordered Tether’s management to stop loaning USDT reserves (or other assets) to Bitfinex.

At present, the New York Attorney General (NYAG) is conducting an investigation into the business operations of IFinex, Inc., the parent company of both Bitfinex and Tether, Ltd. Commenting on the matter, Judge Cohen remarked: 

The Court finds that the preliminary injunction should be tailored to address OAG’s legitimate law enforcement concerns while not unnecessarily interfering with Respondents’ legitimate business activities.

Notably, Judge Cohen has ordered Tether’s management to not loan any type of asset to Bitfinex or other parties that may be working with the exchange. However, Tether may continue to conduct normal business activities, which may also involve working with Bitfinex.

The OAG has also ordered that Tether not distribute any assets from its reserves to its employees or any other third party. Tether’s management may, however, pay its employees for any work done that is related to the company’s day-to-day, or normal, business operations.

Bitfinex To “Vigorously Defend Any Action” By NYAG

As noted in court papers, the injunction will expire in 90 days, but the OAG may file a petition in order to extend the deadline. Court documents also state that neither Bitfinex nor Tether’s management be allowed to make any changes to the loan documents that the OAG has requested.

In response to the Judge’s orders, Bitfinex stated:

We believe that the court’s decision today leaves no doubt that both Tether and Bitfinex are entitled to run their businesses in the ordinary course, even during the short period when this now narrowed preliminary injunction is in place.

Bitfinex’s management also believes the OAG acted in “bad faith” as it overlooked the exchange’s “previous historical, and voluntary cooperation with them.”

The exchange further noted:

We will vigorously defend against any action by the New York Attorney General’s office, and we remain committed, as ever, to protecting our customers, our business, and our community against their meritless claims.

Four Exchanges Represent 96% of Crypto Derivatives Trading, Report Shows

Four exchanges represent 96% of the total crypto derivatives trading volume. According to figures from CryptoCompare’s December 2019 Exchange Report, OKEx is the leading exchange in crypto derivatives trading.

The report shows that during December, OKEx registered an impressive $3.32 billion in daily trading volume. This represents 35.8% of the total market share in crypto derivatives.

Following closely behind is Huobi, with $2.7 billion in daily trading volume and a 29.16% market share. Further behind is BitMEX, with a volume of $1.9 billion and 19.7% market share, and Binance, with a volume of $797 million and 11.4% market share.

Out of all the big exchanges listed above, OKEx was the only one that saw its volume go up. Trading a total of $99.6 billion in crypto derivatives in December, OKEx registered a growth of 11% in comparison to the previous month. Huobi registered $76.5 billion but showed a 14.5% decrease in volume from November, and BitMEX accounted for $51.1 billion and was also down 28.8%.

OKEx was also the third biggest exchange in Ethereum perpetual futures. Following behind it was BitMEX (44%) and Binance (23.2%), OKEx controls roughly 20.8% of that market with a $1.7 billion in trading volume.

Market Leader in Crypto Derivatives

Although BitMEX is leading in the ETH and BTC perpetual futures, OKEx is the top exchange when it comes to crypto derivatives. Founded in 2017 and based out of Malta, OKEx is one of the biggest cryptocurrencies in the world. In fact, in May 2018 OKEx was the world's largest cryptocurrency exchange by reported turnover.

Having launched its own native token in early 2018, the OKB token, the OKEx team is actively working to improve its platform and services. OKEx has its own blockchain in the final stages of testing, OKChain, and has future plans to release a decentralized exchange, OKDEx. Both these products will expand the OKEx ecosystem and add features to its OKB token.

Despite these developments, OKEx continues to focus and give special attention to the derivatives market. In recent months, the company released a data analytics platform for derivatives trading, Bitcoin futures contracts margined with Tether (USDT), and Bitcoin options trading that are scheduled for public launch this month of January.

Despite the success, many in the industry have questioned OKEx’s trading numbers, accusing the company of wash trading, fake volumes and market manipulations.

Growing Popularity

The crypto derivatives market has shown fierce growth since the Chicago Board Options Exchange (CBOE) started trading bitcoin futures back in 2017. Crypto derivatives have grown throughout 2019, both in numbers and in product variety, and most exchanges who adopted such types of products have registered unprecedented growth.

Despite their bad reputation, commonly pointed as the cause behind the fall of America’s former energy and commodities firm Enron, derivatives have brought growth and attention from the general public to the crypto industry. And this trend seems to be ongoing, as just two weeks ago the Chicago Mercantile Exchange (CME) released the long-awaited Bitcoin options, sparking tremendous interest from investors and fueling the busiest crypto derivatives trading day of 2020.

The launch of Bitcoin futures by the CBOE and the CME caused significant price spikes, and promoted the interest of the general public on cryptocurrencies, opening it to a wider audience. It is possible futures will make the crypto market more stable, as in traditional finance it has been shown to make the underlying asset balance out price fluctuations.