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.

Top-Tier Crypto Exchanges Now Represent Less Than 30% of Total Volume, Report Shows

The aggregate trading volume of top-tier cryptocurrency exchanges has dropped 26.26% last month, while the trading volume of lower-tier cryptocurrency exchanges dropped less than 20%.

According to the CryptoCompare December 2019 Exchange Review, the trading volume of cryptocurrency exchanges that, according to CryptoCompare’s Exchange Benchmark tool, are rated AA-B dropped to represent only around 27.4% of the total market.

This means the market share of lower-tier exchanges, rated C-F, increased, even though these platforms saw their trading volumes drop by 19.9%. As CryptoGlobe reported, CryptoCompare’s November report showed the volume of top-tier exchanges dropped nearly 7% that month, while that of lower-tier platforms rose 3.7%.

In November, top-tier cryptocurrency exchanges represented 31.4% of the total market, while in October they account for 33% of the trading volume, while lower-tier exchanges only had 67% of the market share.

trading volume by tier of exchangeSource: CryptoCompare

CryptoCompare’s Exchange Review also covers cryptocurrency derivatives, pricing data, and more. It notes that Binance has become a major derivatives player since it launched its futures products in September, with its BTC perpetual future now being the third most traded product by total monthly volume, at $29.4 billion.

Both Binance and BitMEX represented the majority of the Ethereum perpetual futures market, with 44% and 23% of the volume respectively. OKEx was, however, the top derivatives exchanges in USD terms, trading a total of $99.6 billion in December.

As for regulated bitcoin derivatives products, the CME is still dominating the market, even though total volumes fell 6.2% to $3.96 billion.  Grayscale’s bitcoin trust product, on the other hand, fell 19.6% to $394.72 million.

The report also addresses trans-fee mining cryptocurrency exchanges, noting the top TFM exchange, Bitforex, saw its trading volume rise 5.37% in December, while the second-largest TFM exchange, CoinBene, saw its volume drop nearly 12%.

Decentralized exchanges still only represent 0.01% of the total trading volume in the cryptocurrency space, according to the report, with IDEX being the largest one, trading $8 million in December.

Featured image by Lukas from Pexels.