Bitfinex and Tether have agreed to pay $18.5 million in penalties to the state of New York, according to a statement from New York Attorney General Letitia James.
What is Tether?
Tether is a controversial cryptocurrency with tokens issued by Tether Limited. It formerly claimed that each token was supported by 1 USD, but in March 2019, it changed the backing to include loans to incorporate companies.
Tether is called a stablecoin because it was originally designed to be worth $1.00 all the time, maintaining $1.00 in reserves for each tether that is issued. However, Tether Limited claims that tethers‘ owners have no contractual right, no other legal claims, guarantee that tethers will be redeemed or exchanged for dollars.
Tether Limited and the tether cryptocurrency are controversial because of the company’s alleged role:
- in manipulating the price of bitcoin,
- an unclear relationship with the Bitfinex exchange,
- its apparent lack of a long-term banking relationship,
- the company’s failure to provide a promised audit showing adequate reserves backing the Tether token.
The Bitfinex exchange was the subject of a lawsuit by the New York Attorney General (NYAG) of using Tether’s funds to cover up $850 million in funds missing since the middle of 2018. According to the New York Attorney General, „Tether’s claims that U.S. dollars fully backed its virtual currency at all times was a lie.“
Now, the crypto firms Bitfinex and Tether have settled with the New York Attorney General’s (NYAG’s) office, ending a legal dispute.
Bitfinex and Tether admit no wrongdoing
As part of today’s settlement, Bitfinex and Tether admitted to no fault. As a former federal prosecutor Jason Weinstein claimed: „The Block that the NYAG office’s findings are limited only to the nature and timing of certain disclosures.“ He also said: „Contrary to online speculation, there was no finding that Tether ever issued tethers [USDT] without backing, or to manipulate crypto prices.“
Nevertheless, the NYAG’s office said that at least from June 1, 2017, until September 15, 2017, USDTs were „not backed ‚1-to-1‘ by USD held by Tether in a bank account.“
With the settlement, the long-running legal dispute comes to a termination. Bitfinex and Tether say they have provided more than 2.5 million documentation pages to the NYAG’s office to close the matter. Bitfinex and Tether have agreed to pay $18.5 million in penalties to the state of New York.