Tether Hits Back at Claims Its Reserves Were Used to Cover $850 Million Loss at Bitfinex

Stablecoin operator Tether has responded to allegations that its funds were used to cover an $850 million loss at the crypto exchange Bitfinex — using a statement on April 26 to claim court filings by the New York Attorney General’s office are “riddled with false assertions.”

The state’s top prosecutor, Letitia James, has accused Tether, Bitfinex and associated entities of violating New York law through activities that may have defrauded crypto investors in the state. According to the court filings, the exchange took hundreds of millions of dollars from Tether’s reserves to conceal losses from investors and hide its inability to process clients’ withdrawals.

Tether’s statement, also released by Bitfinex, said:

“The New York Attorney General’s court filings were written in bad faith and are riddled with false assertions, including as to a purported $850 million ‘loss’ at Crypto Capital. On the contrary, we have been informed that these Crypto Capital amounts are not lost but have been, in fact, seized and safeguarded. We are and have been actively working to exercise our rights and remedies and get those funds released.”

The joint statement claimed the New York Attorney General’s office “seems to be intent on undermining efforts” to get the funds released and warned this would ultimately be to the detriment of their customers.

Both companies insisted they have fully cooperated with prosecutors and called on the Attorney General’s Office to “focus its efforts on trying to aid and support our recovery efforts.”

Vowing to challenge the court filings, the statement added:

“Both Bitfinex and Tether are financially strong — full stop. And both Bitfinex and Tether are committed to fighting this gross overreach by the New York Attorney General’s office against companies that are good corporate citizens and strong supporters of law enforcement.”

In January 2018, critics of Tether alleged that the cryptocurrency, which had claimed to have $1 in reserve for every unit of stablecoin issued, was in fact operating a fractional reserve and issuing more tokens than it had backing for. In June last year, Tether said an unofficial audit had shown that its digital currency was appropriately collateralized.

Both Bitfinex and Tether — which share a CEO — had previously received subpoenas from U.S. regulators for still undisclosed reasons back in December 2017.