New York Attorney General Says Bitfinex and Tether Traded Illegally in NY

The New York Attorney General's Office (NYAG) submitted late on Monday, June 8 evidence which it claims proves Bitfinex and Tether traded in the state for longer than they claimed.

The new evidence was filed by NYAG to the New York County Supreme Court as part of an investigation and legal action brought against the two companies in April and aims to prove that both Bitfinex and Tether had continued unregistered and unlicenced operations and, therefore came under the jurisdiction of the NYAG.

Case History

NYAG's action alleges that Bitfinex dipped into the dollar reserves of its affiliate Tether, which claimed every one of its USDT digital tokens is dollar-backed, to fill an $850 million hole in its finances caused by losses at its CryptoCapital payment processor.

Bitfinex is alleged to have then payed back Tether via a credit facility with CryptoCapital using as collateral shares in their parent company iFinex.

Bitfinex and Tether - which are both registered in the lightly-regulated British Virgin Islands - claim they had not operated in New York at the time and do not come under the jurisdiction of the NYAG.

In late May the two companies obtained a stay of demands against the NYAG, which had ordered Bitfinex produce documents related to the case.

Extensive Exhibit(s)

The new evidence - a Memorandum of Law - includes 28 exhibits that aim to prove both Bitfinex and Tether allowed New York investors to trade Tethers until early 2019. The document says:

Even a cursory examination of the facts gathered to date [...] shows that Respondents have extensive and consistent contacts to New York concerning the matters under investigation.

Among the evidence is "Exhibit(s) - H" which presents correspondence between Bitfinex and Mike Novogratz, chief executive of hedge fund Galaxy Digital, who was apparently onboarded as Bitfinex's customer in October 2018.

The NYAG filing continued:

Respondents have repeatedly engaged New York firms to assist them in their business objectives [...] as recently as 2019.

There was no response from either Bitfinex or Tether on their blogs or Twitter feeds, nor from parent company iFinex.

Crypto Trading Volumes Plummet in June, CryptoCompare Report Shows

Cryptocurrency trading volumes plummeted in June to “roughly half of the daily volumes” seen in May, according to the CryptoCompare June 2020 Exchange review report.

The report found that top-tier cryptocurrency exchanges, those with a high ranking on CryptoCompare’s Exchange Benchmark,  saw their trading volumes saw their spot trading volumes drop by 36% last month to $177 billion, while lower-tier cryptoassets exchanges saw their trading volumes drop by 53% to $466 billion.

unnamed.pngSource: CryptoCompare

CryptoCompare notes that last month the highest recorded trading volume in a single day on top-tier exchanges was of $9.26 billion. In comparison, in March’s Exchange Review, the cryptoassets data provider revealed that the March 12-13 crypto market crash led to high in daily trading volumes, as $75.9 billion were traded across exchanges in a single day. Top-tier exchanges traded $21.6 billion that day.

It’s worth noting that the spot volumes did not hit an all-time high, even during the March market crash. In July 2019 and December 2017, when the price of bitcoin hit its all-time high near $20,000, spot volumes hit record highs.

In June, cryptoassets trading platforms charging traditional taker fees represented 76% of the total exchange volumes, while those implementing the tans-fee mining (TFM) model represented less than 23% of the cryptocurrency space’s spot volume.

Fee-charging exchanges, the report adds, traded a total of $455 billion in June, as their trading volume dropped 48% since May. Trading platforms using the trans-fee mining model saw their volumes drop 45% since May, as they traded $141 billion.

Exchanges using the TFM model are seemingly gaining market share. While in March they represented less than 20% of the spot trading volume, in June their market share was of 23%.  As CryptoGlobe reported, these trading platforms often have unusually thin order books and low traffic.

FCoin, the cryptocurrency exchanges that started using TFM, has passed trading and withdrawals earlier this year over the shortage of crypto worth up to $130 million. The firm’s founder revealed that the platform was not hacked, but instead an internal system error gave users more rewards than they should have received.

Featured image by Austin Distel on Unsplash.