New York Attorney General (NYAG) has finally settled charges with stablecoin issuer, Tether, and trading platform, Bitfinex. The settlement concerns long-standing allegations that the companies partnered to issue Tether stablecoins (USDT) to New York residents even though they did not have enough cash to back up the circulating supply.
As per the settlement announced today, Bitfinex and Tether will pay an $18.5 million penalty and desist from offering USDT to New York residents.
The NYAG had alleged that Tether deceived the market by overstating its reserves and stating that USDT tokens in circulation were backed 1;1 by dollar held in reserve. As per its investigations, the regulator claimed that Tether used the cash reserve shortage and its affiliation with Bitfinex exchange to conceal losses worth up to $850 million.
Regarding the scheme, which purportedly lasted between 2017 and 2019, Attorney General James said,
Bitfinex and Tether recklessly and unlawfully covered-up massive financial losses to keep their scheme going and protect their bottom lines. Tether’s claims that its virtual currency was fully backed by U.S. dollars at all times was a lie.
Tether will thus pay the $18.5 million penalty imposed by the NYAG without acknowledging wrongdoing. The settlement follows earlier news from Bitfinex that has repaid fully and with interest the $850 million that it borrowed from Tether to navigate a period of crisis at the exchange.
Today’s settlement significantly puts to bed one of the longest-standing legal proceedings in the cryptocurrency industry, with many participants initially fearing for the future of the industry if the largest stablecoin faces a regulatory onslaught.
Bitfinex and Tether wrote in an update regarding the settlement:
The settlement amount we have agreed to pay to the Attorney General’s Office should be viewed as a measure of our desire to put this matter behind us and focus on our business.
Tether’s market cap has grown massively during the period of the lawsuit, climbing from $2 billion to $34.7 billion at the time of writing.
