New York Supreme Court Orders Tether To Freeze All Transfers To Bitfinex

A judge from the state of New York has ordered cryptocurrency exchange Bitfinex and its stablecoin issuer Tether to hand over documents pertaining to a loan and credit which Tether provided to Bitfinex.

The state’s Supreme Court’s Judge Joel Cohen, cited comments from a preliminary hearing which took place last week in New York City, in an opinion published late Thursday, ordering executives from both Tether and Bitfinex to stop loaning Tether’s reserves to Bitfinex, along with several other stipulations. These all form part of an ongoing investigation which is being conducted by the New York Attorney General’s office (NYAG).

Cohen wrote:

“The Court finds that the preliminary injunction should be tailored to address OAG’s legitimate law enforcement concerns while not unnecessarily interfering with Respondents’ legitimate business activities.”

Cohen specifically ordered the following:

1. Tether cannot loan any assets to Bitfinex or other parties, except in the normal course of conducting its business;
2. Tether cannot distribute any funds from its reserves to executives, employees, or other individuals except for payroll and normal contractor, consultant or vendor payments;
3. Neither Bitfinex nor Tether are allowed to modify in any way documents asked for in the NYAG’s original subpoenas; and
4. The injunction will expire in 90 days, but the NYAG’s office can petition the court to extend it two weeks before then.

Strangely enough, the order seems to state that Tether can now invest its reserves as part of normal business operations. The company has previously stated in court filings that it has used its reserves for investment endeavours, but its unclear what it invested those funds in.

Bitfinex praised the judge’s decision and wrote:

“We believe that the court’s decision today leaves no doubt that both Tether and Bitfinex are entitled to run their businesses in the ordinary course, even during the short period when this now narrowed preliminary injunction is in place.”

Furthermore, Bitfinex also claims that the NYAG’s office has in the past acted in “bad faith” stating it ignored “our previous historical, and voluntary co-operation with them.”

The exchange added:

“We will vigorously defend against any action by the New York Attorney General’s office, and we remain committed, as ever, to protecting our customers, our business, and our community against their meritless claims.”

The judge’s orders come mere weeks after the NYAG managed to secure a preliminary injunction, subsequently freezing Tether’s assets and ordering the stablecoin issuer to hand over documents concerning a $625 million loan as well as a $900 million line of credit which it offered to Bitfinex.

Bitfinex, of course, required the funds to continues operations, specifically the processing of customer withdrawals after losing access to as much as $850 million which was held by Crypto Capital.

Furthermore, Reginald Fowler and Ravid Yosef of Crypto Capital were indicted by the Department of Justice for granting illegal banking services to crypto businesses.