Tether, a stablecoin firm that shares ownership and management with Bitfinex has admitted in court that it has some of its reserves in BTC and other assets. This revelation is part of the ongoing battle between Bitfinex and the New York Attorney General’s office.
David Miller, Bitfinex’s attorney said,
Prior to the April 24th order … Tether actually did invest in instruments beyond cash and cash equivalents, including bitcoin, they bought bitcoin.
Miller said this while arguing that the court did not have the power to restrict Tether’s investments to cash.
In response, New York Supreme Court Judge, Joel M Cohen said,
Tether sounded to me like sort of the calm in the storm of cryptocurrency trading.
And so if Tether is backed by bitcoin, how is that consistent? If some of your assets are in a volatile currency that Tether is supposed to somehow modulate, that seems like it’s playing into what they are saying.
The Case Against Tether and Bitfinex Continues Building
For years, the general public has suspected that Tether has been misusing its reserve funds. In April, the NYAG office revealed that Tether had used $850 million of its cash reserves to give a loan to Bitfinex. Allegedly, Bitfinex exchange would have become insolvent without the loan. Bitfinex’s lawyer brought this information to light after NYAG issues a court order against Bitfinex.
After the lawsuit, Jean Louis van der Velde, Bitfinex’s CEO claimed that the lawsuit was full of inaccuracies and false assertions. However, the lawsuit eventually unveiled that there was some truth in the case against the exchange and Tether. According to a report, Bitfinex unveiled that Tether (USDT) is backed by cash reserves worth $2.1 billion. This figure is equivalent to 74 percent of its outstanding stablecoins. The remaining 26 percent is held by Bitfinex.
Before the lawsuit, Tether changed its user policy in February noting that all its coins were not backed by cash. The firm said that Tether Dollars were now backed by fiats and other cash equivalents. It also noted that some of its reserves were in “other assets and receivables from loans made by Tether to third parties”.
Reportedly, Bitfinex managed to raise $1 billion through a token sale. Dubbed “LEO” the tokens are valued at $1.04 and they began trading on Bitfinex on Monday.
Paolo Ardoino, Bitfinex’s CEO tweeted,
. @bitfinex is able to raise 1b USDt in 10 days, in a private sale. Private companies, giants in our industry and outside, made investments for > 100m each. A legion of inside and outside users made investments for > 1m each.
— Paolo Ardoino (@paoloardoino) May 13, 2019
Do you think Tether’s decision to have some of its reserves in BTC is wise? Let us know in the comments below.