The New York Attorney General Settles Its Case With Bitfinex And Tether

February 24, 2021 03:00 PM
Dark Crypto

Dark Crypto


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Crypto rebounded this morning after yesterday’s sell-off. Binance Coin (BNB) is seeing the largest gains in the Top 10 and was up 17% earlier today.

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Yesterday, the New York Attorney General (NYAG) announced it had settled its case with Bitfinex and Tether over a USD 850 million loan between the 2 firms. The settlement of the case, which was revealed in April 2019, is of key importance for Bitfinex, Tether, and crypto more broadly.

Bitfinex and Tether’s settlement involves the payment of a USD 18.5 million penalty and doesn’t involve any admission of wrongdoing in the case. The 2 firms, however, have committed to bolstering efforts to exclude New York residents from their services. Tether will also regularly provide documents to NYAG that substantiate the reserves backing USDt and will, on a quarterly basis for the next 2 years, “publish the categories of assets backing tether.” 

The NYAG’s settlement document largely corroborates the 2 firms’ assertions from the onset of the case: after attempts were made to retrieve funds that were seized by various law enforcement agencies from payment process CryptoCapital, Bitfinex and Tether organized the loan to manage fiat withdrawals. 

The document also directly addresses accusations from before the case was revealed surrounding USDt not being fully backed. In recent months, unsubstantiated accusations regarding USDt’s backing and alleged use to manipulate BTC prices saw a noticeable uptick, with U.S. Google searches for the term “USDt” beginning to rise in December after virtually years of depressed interest. 

As recently as last week, JPMorgan Chase & Co. strategists wrote, “Were any issues to arise that could affect the willingness or ability of both domestic and foreign investors to use Tether, the most likely result would be a severe liquidity shock to the broader cryptocurrency market which could be amplified by its disproportionate impact on high-frequency-trading-style market makers which dominate the flow.” Those remarks were reported in a Bloomberg article titled “JPMorgan Joins Choir Warning of Tether’s Sway on Crypto Markets.”

We don’t consider it a coincidence that the NYAG began using softer tones on the BFX case once it began leading an antitrust probe against Facebook. Nevertheless, since the Tether/Bitfinex case was revealed, USDt saw an inflow of about USD 32 billion. 

Crypto incumbents, especially those who lacked regular access to USD (Google search data shows that the top 3 nations in terms of interest over the past year are China, Laos, and Cuba), never seemed to accept the claims leveled against Tether or Bitfinex. What was of greater impact was that new entrants into the space, namely institutional investors, had begun to discover the case and accompanying accusations without having prior experience working with Tether or Bitfinex. 

The case’s resolution, and confirmation that neither Tether nor Bitfinex had ever engaged in any of the misconduct that had been alleged, lifts a potential burden for new entrants looking to justify a move into crypto. Beyond this, the resolution of the case is an enormous win for the 2 businesses. Having settled after 2 years of aggressive investigation, the conclusion of the case paves the way for Tether and Bitfinex’s further growth which has proven crucial to the crypto space thus far. 

In months when more flashy headlines gained the attention of the public regarding BTC, we feel that Tether and Bitfinex putting this case behind them is a huge win for crypto's legitimacy and further growth. 

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