Fresh claims have emerged implicating Tether and Bitfinex, its issuer, of hiding a loss of funds amounting to $850 million. This is according to the New York attorney general (AG) igniting earlier suspicions whether the stable value coin has a 1:1backing against the U.S dollar.
Surprisingly, Tether lost $10 billion within an hour of the claims coming out. The allegations have also implicated Bitfinex, a cryptocurrency exchange with close ties with the stablecoin issuer. The duo has in the past attracted attention from the United States Department of Justice on whether Tether has been used to artificially prop the price of Bitcoin.
For Tether And BitFinex, It’s Not The First Time
In 2017, Tether and Bitfinex received subpoenas from the United States Commodity Futures Trading Commission. Bitfinex has also been having trouble finding a banking partner forcing it to turn to Crypto Capital Corporation, a Panamanian firm to act as an intermediary when wiring dollars to traders.
According to the AG:
“Despite the sheer amount of money it handed over, Bitfinex never signed a contract or any other agreement with Crypto Capital…executives at Bitfinex and Tether suspected Crypto Capital had lost, stolen or absconded with the money, and they haven’t been able to find or recover roughly $850 million. None of that has been disclosed to investors.”
In response, Bitfinex said that the AG acted in bad faith when reporting the missing funds. The crypto exchange maintained that no funds have been lost and they are working closely with the AG’s office.
However, documents filed in court confirm the suspicions. For example, when the loss was announced, Tether and Bitfinex were involved in corporate transactions which saw Bitfinex given the right to access $900 million belonging to Tether and Bitfinex. As per the AG’s claims, this amount is equivalent to what Tether is claimed to have a 1:1 U.S dollar backing.
The AG also included correspondence between Crypto Capital and Bitfinex’s top management showing heightened pressure for the exchange to acquire more funds to cater to withdrawals. If the funds were not granted Bitfinex is seen lamenting that “BTC could tank below 1K.” Bitcoin later lost 4.7 percent.
After losing the funds, Bitfinex moved $625 million out of Tether’s bank account and credited it the same amount to Tether’s accounts with Crypto Capital. As per the AG, “That ‘credit’ was illusory…Bitfinex’s risk of loss of several hundred million dollars [was transferred] onto Tether’s balance sheet.”
Find Out Why Most Traders Prefer Binance
For over two years, UseTheBitcoin has done the research, covered the news, and helped readers find the best blockchain projects. The one thing we keep coming back to is Binance.