NYAG to Court: Don't Let Bitfinex Keep Stonewalling Our Investigation

Bitfinex may be enjoying a break from having to give documents to investigators, but it should be preparing for when the reprieve ends, the NYAG said.

AccessTimeIconOct 2, 2019 at 4:30 p.m. UTC
Updated Sep 13, 2021 at 11:31 a.m. UTC

Bitfinex may be enjoying a break from having to produce documents to investigators, but it should be preparing for when the reprieve ends, the New York Attorney General's office said.

In a newly disclosed letter, written by senior enforcement counsel John Castiglione and filed on Sept. 30, the NYAG's office outlines how Bitfinex and Tether, as well as other affiliated entities, have not produced any documents pertaining to an alleged cover-up of an inter-company loan.

The NYAG's office revealed it was looking into Bitfinex, its sister stablecoin issuer Tether, and a number of other entities and individuals affiliated with the companies in April, alleging that Bitfinex lost access to nearly $1 billion in customer and corporate funds.

Further, the NYAG's office alleged, Bitfinex made up the shortfall by borrowing from Tether's reserves, which were meant to back its USDT stablecoin. The state legal enforcer successfully argued before New York Supreme Court Judge Joel Cohen that the respondents should turn over a number of documents about these alleged transactions, as well as halt any further lending by Tether to Bitfinex.

While the judge did rule in the NYAG's favor, Bitfinex immediately appealed and secured a temporary stay over the document production requirements last month, and has until November to "perfect" its appeal.

Castiglione wrote Tuesday that the companies did not follow the court order before the stay was granted, saying:

"Even though one month elapsed between the issuance of this Court's August 19 Order and the stay, no documents were produced. That means that since the granting of the 354 Order in April, Respondents have failed to produce a single non-jurisdictional document."

Dawdling on documents

The appeal will draw the case out for several more months, during which time no documents will be produced, Castiglione wrote Tuesday.

Because of this, he asked Judge Cohen to have the respondents compile all of the necessary responsive documents now, "so that full and immediate production can be made to the OAG once the appeal concludes."

If the judge does not order the companies to produce these documents, then they will most likely continue delaying, Castiglione wrote, saying:

"Unless the Court directs Respondents to collect these materials now, what will happen is predictable: Respondents will, upon lifting of the stay, argue for more time to search and collect materials, file more motions challenging the scope of the 354 Order, and otherwise take whatever steps they believe will be tolerated by the Court to further delay the OAG' s investigation."

"By ordering Respondents to get materials in order now, the Court will ensure an orderly process and will facilitate the conclusion of the OAG' s investigation," he added.

Stuart Hoegner, General Counsel to Bitfinex and Tether, told CoinDesk that the companies "remain pleased" with the appellate division's order last month granting the stay.

"We will reserve any further comment in this matter until we respond directly to the court," he said.

NY Attorney General Letitia James image via lev radin / Shutterstock


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