Bitfinex Threatened by New York Attorney General’s Preliminary Injunction

A new court hearing is expected this Tuesday, with an attempt to clarify the demands of the New York Attorney General against iFinex, the operator of the Bitfinex exchange.

The New York Attorney General is attempting to make its case against Bitfinex through a recent preliminary injunction, and the iFinex operator, Tether, Inc. and Bitfinex have cried out at the methods. The NYAG recently received a court order to refine its demands on the exchange, and make a narrower case on the faults of the companies.

The NYAG injunction follows the admission on the side of Bitfinex that the exchange has lost access to $850 million in fiat, held with its payment provider Crypto Capital.

Bitfinex has complained that the actions of NYAG may end up hurting traders, by blocking the access of the exchange to the $900 million credit line extended by Tether. It is precisely this credit line that has ignited the interest of the NYAG, as Tether is limited in its activity in the state of New York.

But for now, there is no clear evidence that Bitfinex and its case fall under the Martin Act. However, the current investigation is seen as one of the greatest risks for the exchange, to fall under one of the strictest security fraud laws in the USA. The NYAG so far has not detailed how Bitfinex and Tether would fall under the Martin Act. Part of the decision hinges on the nature of Tether’s USDT, and whether the stablecoin is a security.

The recent injunction against Bitfinex was followed by another drive to gather USDT coins back into the Treasury. Currently, the Treasury wallet holds more than 344 million USDT, after mopping them up from exchanges. Bitfinex still holds just around 12 million USDT.

Bitfinex is attempting to compensate for its losses, by recently announcing a sale of the LEO token, aimed at drawing in new investors to bridge the loss of funds, in case they are not recovered on time. The Bitfinex funds were seized based on the activity of Crypto Capital, which was found to be related to companies moving funds with unknown origins, possibly related to organized crime.

The crypto community believes the ongoing investigation may be one of the riskiest periods for trading digital assets, as USDT makes up as much as 80% of Bitcoin (BTC) trading volumes.

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