New York State

The history behind the iFinex probe

New York Attorney General Letitia James announced that her office obtained a court order against iFinex.


Bitfinex. Shutterstock

New York Attorney General Letitia James announced late last week that her office obtained a court order against iFinex, the company that operates the exchange Bitfinex and the stablecoin Tether, a digital coin that claims to be backed by the U.S. dollar. The attorney general’s office determined that iFinex dealt with an undisclosed loss of $850 million by giving Bitfinex access to up to $900 million of Tether’s cash reserves to hide the loss. Now, James’ office – and the court order – are demanding that iFinex cease further dissipation of the dollars backing the Tether coin. The company has denied the veracity of the attorney general’s findings.

This investigation – while focused on one cryptocurrency exchange in intricate detail – springs from an overarching sweep of the crypto marketplace that former New York Attorney General Eric Schneiderman launched in spring of 2018. That inquiry, labeled the “Virtual Markets Integrity Initiative,” solicited disclosures from 13 virtual currency trading platforms to gain transparency on the practices of those exchanges in an effort to protect investors and consumers. That September, then-Attorney General Barbara Underwood announced preliminary results of that fact-finding mission, reporting that the platforms had largely failed to implement measures to prevent or stop abusive trading. It also found “pervasive conflicts of interest” in the trading platforms.

Now, the initiative is moving into a new phase with the iFinex findings. “New York state has led the way in requiring virtual currency businesses to operate according to the law,” James stated in the press release last Thursday. “And we will continue to stand up for investors and seek justice on their behalf when misled or cheated by any of these companies.”

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