Crypto exchange Bitfinex said it fully repaid a $ 750 million loan from stablecoin issuer Tether. However, this does not eliminate its legal problems.
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Bitfinex, the fifth largest cryptocurrency exchange by volume, reportedly repaid the remainder of its $ 750 million loan balance to stablecoin issuer Tether.
The exchange said today that it paid $ 550 million to Tether in January, after paying $ 100 million in each of the previous two years.
Bitfinex, which shares the key leadership with Tether, lifted its credit limit in 2018 after claiming it received $ 850 million from payment processor Crypto Capital. The New York Attorney General’s (NYAG) office has been investigating the loan since 2018 on suspicion that Bitfinex has lent it to cover the damage. Crypto Capital itself has been accused of money laundering.
As NYAG announced in April 2019:
“To fill the gap, Bitfinex and Tether executives took a series of conflicting corporate transactions; In this way, Bitfinex told investors that Tether has consistently fully supported tether cryptocurrency in exchange for dollars at a rate of 1 to 1 for years. ”
As Bitfinex general counsel Stuart Hoegner told The Block, the exchange “needed short-term cash and Tether was ready to lend on commercially reasonable terms.”
The New York Attorney’s argument is that using Tether reserves in this way would constitute fraud. Earlier in the investigation, Tether admitted in March 2019 that it was fully backed by real US dollars, but also by “cash equivalents” and sometimes “other assets and receivables.”
Willamette University Faculty of Law professor Rohan Gray, who also served as Vice President of the Digital Currency Global Initiative, emphasized the old crypto proverb “Don’t trust, verify” by telling Decrypt that there is no reason to trust Bitfinex’s repayment.
“However, it would be a serious mistake to adopt a view that” everything is fine “as to what happened, even if the reimbursement was made as claimed. “The main concern remains that Tether’s assets are not fully supported, and its non-transparent relationships with Bitfinex and Deltec remain ethically and legally problematic.”