The cryptocurrency exchange Bitfinex has been held responsible for over $800 million in client and corporate funds. In a case dating back to 2019, the exchange is accused of lying to both clients and investors. Furthermore, it is under suspicion of using assets from the Tether stablecoin to cover up the losses. Bitfinex maintains that it sent the funds to Crypto Capital Corp.
What’s the Big Deal?
NY Attorney General Letitia James is ready to go after Bitfinex guns blazing. In an interview with CoinDesk she stated “Not even virtual currencies are above the law.” The statement comes after the court of appeals denied Bitfinex’s assertion that Tether was neither a commodity or security, and therefore did not fall under the jurisdiction of the court.
Tether is a stablecoin that maintains very close to a $1.00 value. Upon release, it was promised that for every Tether in circulation there was $1.00 held in reserve to back it. However, this changed in 2019 when a released affidavit claimed only 74% of outstanding tethers are backed by “cash and cash equivalents.” As the most widely traded cryptocurrency, Tether is used as a popular trading pair on exchanges. However, it is too early to tell what effect any decision will have on the price of Tether. There is over $9 billion worth of it in circulation. A plunge in price could temporarily put the cryptocurrency in crisis as there are other alternative stablecoins to replace it.
Brock Pierce Under Scrutiny?
Letitia James is also taking a look at other cryptocurrency companies. This includes Tether Holdings Limited, founded by now-presidential candidate, Brock Pierce. The former child actor has issued no comment and the New York State Attorney Generals office has offered the vague comment of “we cannot confirm or deny, at this time, whether our investigation includes Brock.”
Brock is a polarizing figure in the blockchain space, oft-criticized for his unconventional wardrobe and the creation of the EOS cryptocurrency. EOS raised a staggering $4 billion in the largest ICO in history. It paid $24 million in fines to the SEC after coming to a settlement agreement. The relatively small size of the penalty has allowed EOS to continue to operate, rising to the #11 ranked coin on CoinMarketCap.com.