On April 25th, New York Attorney General Letitia James announced that her office obtained a court order enjoining iFinex Inc., operator of the Bitfinex virtual asset trading platform, and Tether Limited, issuer of the “tether” virtual currency, and their related entities, from further violations of New York law in connection with an ongoing activities that may have defrauded New York investors that trade in virtual or “crypto” currency.
“Our investigation has determined that the operators of the ‘Bitfinex’ trading platform, who also control the ‘tether’ virtual currency, have engaged in a cover-up to hide the apparent loss of $850 million dollars of co-mingled client and corporate funds,” said Attorney General James. “New York state has led the way in requiring virtual currency businesses to operate according to the law. And we will continue to stand-up for investors and seek justice on their behalf when misled or cheated by any of these companies.”
It seems, the attorney general alleges, that Tether is not in fact backed one-to-one by U.S. dollars (as the company claimed until March of this year) and that Bitfinex can't cover customer withdraws.
Bitcoin plunged as much as 5% after a major cryptocurrency was accused of pulling $700 million from the reserves backing its digital coin to cover up $850 million in missing funds.