Tether Ltd and Bitfinex will pay a fine of $ 18.5 million following an out-of-court settlement with the New York State Attorney General (NYAG). This agreement is the end of the legal drama for the USDT and the dispersal of a potential black swan for the entire market.
The end of a judicial soap opera
The exchange Bitfinex and its sister company Tether Ltd behind the stablecoin of the same name reached an out-of- court settlement with the New York State Attorney General’s Office (NYAG) after 2 years of litigation. As part of the deal, the two companies agreed to pay a fine of $ 18.5 million .
In April 2019, the New York State Attorney General filed a lawsuit accusing the Bitfinex exchange of using the reserves of its sister company Tether Ltd to cover a loss of $ 850 million . As a result, the Tether stablecoin (USDT) no longer had full convertibility into dollars.
Letitia James, New York State Attorney General, said:
“Bitfinex and Tether illegally and recklessly hedged significant financial losses to maintain their business and protect their bottom line (…) Tether’s claims that its stablecoin was fully backed by dollars at all times were a lie. “
Thus, Tether Ltd has long been accused of lacking transparency about its reservations. This matter was the focus of attention as it threatened the integrity of the USDT and therefore represented a systemic risk for the entire market .
The attorney general also demanded that Bitfinex and Tether cease operations in New York state . However, the loss of this market is anecdotal for both companies.
As part of the deal, Tether also volunteered to provide the NYAG office as well as the public with a quarterly USDT reserves update .
Stuart Hoegner, Legal Counsel for Bitfinex, said:
“We share the Attorney General’s goal of increasing transparency … We would disclose to both the Attorney General’s office and the public additional information about Tether’s reserves on a quarterly basis. “
In the settlement agreement, the NYAG office also acknowledged the recent repayment of Bitfinex’s loan to Tether. In early February, the Bitfinex exchange claimed to have repaid its $ 900 million loan from its sister company.
With this out-of-court settlement, the USDT’s long legal drama comes to an end. Bitfinex and Tether say they have provided more than 2.5 million pages of documentation to the NYAG office to close this case.