New York Judge orders Tether to document USDT backing

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The judge for the Unit­ed States Dis­trict Court for the South­ern Dis­trict of New York, Kather­ine Polk Fail­la, ordered Teth­er to prove 1‑to‑1 back­ing of its epony­mous sta­ble­coin, Teth­er (USDT). The com­pa­ny is required to pro­vide “gen­er­al ledgers, bal­ance sheets, income state­ments, cash-flow state­ments, and prof­it and loss state­ments” and oth­er doc­u­ments to the court. 

The order was pub­lished on Sept. 20 as a part of a case that start­ed back in 2019 — the ini­tial com­plaint by a group of investors against iFinex, Teth­er and Bitfinex’s par­ent com­pa­ny, alleged that the firm manip­u­lat­ed the cryp­to mar­ket by issu­ing unbacked Teth­er with an inten­tion to inflate the price of cryp­tocur­ren­cies like Bit­coin (BTC).

Judge Polk Fail­la dis­missed the iFinex requests to block the order on the grounds that the com­pa­ny has ear­li­er pro­duced the doc­u­ments “suf­fi­cient enough” for the Com­mod­i­ty Futures Trad­ing Com­mis­sion and the New York Attor­ney Gen­er­al. She found that the Plain­tiffs’ demand for “undoubt­ed­ly impor­tant” doc­u­ments is well-estab­lished as they “appear to go to one of the Plain­tiffs’ core allegations.”

Relat­ed: Teth­er USDT sta­ble­coin goes live on Near Pro­to­col to boost DeFi presence

Pre­vi­ous­ly, in Sep­tem­ber 2021, Judge Polk Fail­la dis­missed the Plain­tiffs’ claims against iFinex under the Rack­e­teer Influ­enced and Cor­rupt Orga­ni­za­tions Act and alle­ga­tions relat­ed to rack­e­teer­ing or using the pro­ceeds of rack­e­teer­ing for investments.

In Feb­ru­ary 2021, in anoth­er case set­tled with the Office of the New York Attor­ney Gen­er­al, iFinex agreed to pay $18.5 mil­lion for dam­ages to New York and sub­mit to peri­od­ic report­ing of their reserves in addi­tion to stop­ping ser­vice to cus­tomers in the state. The set­tle­ment came after a 22-month inquiry into whether the com­pa­ny had been try­ing to cov­er up its loss­es — tout­ed to be worth $850 mil­lion — by mis­rep­re­sent­ing the degree to which its USDT reserves were backed by fiat collateral.

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