Earlier this week, a New York judge has demanded that controversial cryptocurrency exchange Bitfinex turn over documents relevant to the exchange’s purported cover-up of an $850 million loss with a loan from Tether, a stablecoin issuer that some have deemed as too close to the exchange for comfort.
However, the judge, Joel M. Cohen of the New York Supreme Court, wants to sort out a few things before the demands must be met.
Selected quote #1: “I recognize the point that banks don’t have all of the dollars available at a moment’s notice. I also recognize that you’re not banks, you’re not heavily regulated.” – Judge Joel M. Cohen on Tether
— Nikhilesh De (@nikhileshde) May 6, 2019
”Amorphous and Endless”
During a hearing on Monday afternoon, Cohen said that he took issue with the “substantive and temporal” scope of the preliminary injunction that was secured by the New York Attorney General’s office at the end of April.
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“The preliminary injunction that we have right now is vague, open-ended and not sufficiently tailored to precisely what the AG has shown will cause imminent harm,” he explained. “I think it’s both amorphous and endless.”
Therefore, a week was granted for the attorneys of NYAG, Bitfinex, and Tether to agree on what the scope of the injunction will be. “What I would suggest you both do is meet and talk about it, you seem like a reasonable group, in let’s say a week either with a single or proposed revision that accomplishes what we’re trying to accomplish here, and if you can’t, with individual proposals,” he said.
The injunction at the center of the judge’s demands was originally filed on April 25th, the same day that the NYAG revealed the discovery that Bitfinex had taken a $1 billion loan from Tether’s reserves after losing $850 million to Crypto Capital, one of the exchange’s payments processors.
Federal prosecutors eventually revealed that Crypto Capital’s operators had its accounts frozen after its operators were indicted for bank fraud.
Last week, attorneys for Bitfinex and Tether filed to either vacate or modify the preliminary injunction, arguing that barring Btifinex from accessing the funds that Tether had loaned to it “would not protect anyone but would instead cause great disruption to Bitfinex and Tether — ultimately to the detriment of market participants on whose behalf the Attorney General purports to be acting.”
Since the injunction was filed, Bitfinex’ customers have withdrawn over 30,000 Bitcoins and 1 million Ether tokens. In the filing to vacate or modify, it was said that the market caps of “dozens of cryptocurrencies” collectively lost more than $10 billion within the hour that the injunction was made on April 24th.
The news also coincides with Bitfinex’ effort to launch a $1 billion token sale, money that the exchange plans to use to cover its losses.