Attorney General of New York sues Bitfinex and Tether to find "fraud in progress" by businesses

The Attorney General of the State of New York (NYSAG) is suing Bitfinex, the cryptocurrency exchange, and the affiliate Tether, the company behind the stablecoin of the same name.

The 23-page document, dated April 24, indicates that the New York AG office has reason to believe that several merchants based in New York and the United States are trading on the company's platform. In 2018, Bitfinex declared that it would no longer offer trading to these customers. According to the group, the OAG has opened an investigation into "ongoing fraud perpetrated by Bitfinex and Tether", requesting all documentation related to Bitfinex users in the state of New York.

The prosecution details paint a picture of Bitfinex and Tether engaged in "undisclosed conflicting transactions aimed at covering Bitfinex's losses by transferring money to reserve funds," according to the Attorney General's office.

The complaint also claims that Bitfinex has partnered with the Panama-based payment processor, Crypto Capital, to handle withdrawals from customers after struggling to find a reputable bank with which to work. Despite considerable sums involved, Bitfinex has not signed a contract or formal agreement with Crypto Capital.

According to the lawsuit, Bitfinex also mixed customer funds via Crypto Capital, which means the company's mixed funds held on behalf of clients with its own capital. "According to the documents provided to the BVG by the surveyed companies, in 2018, Bitfinex had placed more than $ 1 billion in customer and business funds co-mixed in Crypto Capital," the lawsuit says.

"As explained to BVG lawyers by the defendants' lawyers, Bitfinex and Tether have also used a number of third-party payment processors to process customer withdrawal requests, including various companies owned by Bitfinex / Tether executives, and to other friends of Bitfinex … OAG believes that Bitfinex used third-party payment processors such as Crypto Capital because, at the time, Bitfinex did not have any reliable bank that could or could work with her. "

In October 2018, Bitfinex began to fight customer withdrawal requests. According to the Attorney General of the State of New York, this was due to the loss or theft of about $ 851 million in funds by Crypto Capital. To date, Bitfinex has not publicly disclosed the loss of funds.