Cryptocurrency exchange Bitfinex will have to face allegations from New York State that it hid millions in lost funds, according to a ruling by the State Supreme Court’s Appellate Division on Thursday.
iFinex, which operates both Bitfinex and Tether, argued the funds had been deposited with a Panama-based company and were later seized by authorities in different countries. The firm had earlier also said it has been working to recover the funds seized by the Portuguese, Polish and American governments.
In its decision, the appeals court rejected the argument that tether was neither a commodity nor a security, and affirmed the stablecoin falls under the court’s jurisdiction.
“Not even virtual currencies are above the law,” New York Attorney General Letitia James told CoinDesk in a statement.
As it’s headquartered in Hong Kong and registered in the British Virgin Islands, Bitfinex had also argued it does not fall under the jurisdiction of state authorities and doesn’t cater to local traders.
The court rejected the argument on the grounds the Attorney General’s office was seeking documents going back to 2015, and iFinex had permitted New York customers to trade on the Bitfinex platform until January 2017. In addition, the court noted some of the firm's executives had been based out of New York.
“We will respect the court's order. We have no further comment on this matter at this time,” BitFinex’s General Counsel Stuart Hoegner said in an emailed statement.
Read the court ruling below:
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.