Crypto exchange Bitfinex has lost a legal battle to appeal the court decision that effectively killed its attempt to refrain from handing over documents to the New York Attorney General on the grounds of jurisdictional overreach.
Earlier today, New York Supreme Court refused, again, the argument that the US laws do not apply against the popular crypto exchange, which is headquartered in Hong Kong but registered in the British Virgin Islands.
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Bitfinex has repeatedly questioned the New York Attorney General’s oversight authority in an official response to the ‘reply brief’ filed by the NYAG on December 4. Making matters worse, says Bitfinex, OAG has proceeded under a statute, the Martin Act, governing securities and commodities, neither of which describes the product bought by the supposed victims here, its stablecoin Tether.
At the time, the attorney responded to Bitfinex’s appeal challenging the Aug 19 verdict that ordered them to cooperate in their ongoing investigations. The NYAG’s filing described the exchange’s arguments as backward, forfeited, and “meritless.”
The court confirmed that the State’s Attorney General has sufficient authority to investigate the activities of iFinex—which owns both Tether and Bitfinex— and ordered the controversial affiliated firms to turn over financial documents related to an alleged $850 million fraud.
The ruling not only grants the crypto-adverse attorney general jurisdiction over Bitfinex’s broader activities, but also eliminated the stay imposed on the NYAG in May 2019 after the New York Supreme Court modified the substance and scope of the original injunction filed by NY Attorney against Bitfinex’s business.
Bitfinex makes loan repayments to Tether
The crypto exchange defended itself saying the money was deposited with a Panamanian-company called Crypto Capital but then was seized and safeguarded in several jurisdictions, including Poland, Portugal, the UK, and the United States, all through no fault of Bitfinex. Based on these arguments, lawyers for the companies have asked for the case to be dismissed.
iFinex Inc., Bitfinex’s parent firm, alleged earlier this year that it paid back another $100 million to Tether, thus now covering more than 20 percent of its $700 million loan facility they took in 2019. The stablecoin printer started to repay the loan in July 2019 by transferring $100 million to Tether’s reserves.
Additionally, the crypto exchange operator applied for subpoenas in different states, asking federal courts to aid it in retrieving funds held for Crypto Capital in some banks.
Bitfinex and Crypto Capital had been involved with each other because the major crypto venue was unable to access about $850 million in client and corporate funds that were still tied up with the Panamanian payment processor.