MW Bitcoin tumbles after New York accuses Bitnex of using Tether reserves to cover up missing $850 million

The filings ‘were written in bad faith and are riddled with false assertions,’ Bitnex claims

Bitcoin remained under pressure Friday, a day after New York’s attorney general’s office said it had obtained a court order against iFinex Inc., the operator of the Bitnex cryptocurrency exchange, in relation to an alleged $850 million coverup.

“Our investigation has determined that the operators of the ‘Bitnex’ trading platform, who also control the ‘tether’ virtual currency, have engaged in a coverup to hide the apparent loss of $850 million of co-mingled client and corporate funds,” said New York Attorney General Letitia James, in a news release.

The ling claims Bitnex and Tether (https://iapps.courts.state.ny.us/fbem/DocumentDisplayServlet? documentId=vIexA1b0spKOnK_PLUS_ZUGTJ3A==&system=prod) engaged in “undisclosed, conicted transactions to cover Bitnex’s losses by transferring money out of tether reserve funds” to make up for an apparent $851 million loss. The court ordered Bitnex to refrain from transferring Tether funds to Bitnex accounts, halt dividend payments or any other distributions to executives. The attorney general’s office said Bitnex had already taken at least $700 million from Tether’s reserves to mask losses.

Bitnex didn’t respond to a MarketWatch request for comment but in a statement on its website (https://www.bitnex.com/posts/356) said that the filings “were written in bad faith and are riddled with false assertions.”

Tether has long argued it’s stablecoin — a cryptocurrency that is pegged 1-to-1 with another asset — is fully backed by U.S. dollars, but has yet to provide a public audit to conrm it has the reserves.

In June 2018, law firm Freeh, Sporkin & Sullivan confirmed that at the close of business on June 1, 2018, the company did have sufficient dollars to back its Tether in circulation. But questions were raised after the law firm did not draw any conclusions for activity before the close of business on June 1, despite having access to the accounts for four months prior.

Read: How Bitnex, Tether are raising eyebrows in the cryptocurrency market (http://www.marketwatch.com/story/why-bitnex-tether-are-raising-nagging-questions-in-the- cryptocurrency-market-2018-01-30)

Read: Law firm conrms Tether was — as of June 1 — 100% backed by U.S. dollars, but questions remain (http://www.marketwatch.com/story/law-rm-conrms-tether-was-as-of-june-1-100-backed-by-us-dollars-but- questions-remain-2018-06-20)

The price of a single bitcoin fell from above $5,500 to an intraday low at $5,103.01 Thursday on the Kraken crypto exchange, a loss of 7.2%. In most recent trade, a single bitcoin fetched a little over $5,200.

Read: Tether reverses claim of 100% dollar backing, sparking criticism (http://www.marketwatch.com/story/tether-reverses-claim-of-100-dollar-backing-sparking-criticism-2019-03- 14)

Bitnex, the Hong Kong-based cryptocurrency exchange and Tether share common investors and management.