A lawyer for iFinex, the company behind the Bitfinex cryptocurrency exchange and”stablecoin” Tether (USDT), has admitted in an affidavit that the company only has enough cash on hand to cover 74% of the tethers it has issued into cryptocurrency trading markets.
“As of the date I am signing this affidavit,Tether has cash and cash equivalents (short term securities) on hand totaling approximately$2.1 billion, representing approximately 74 percent of the current outstanding tethers.”
That statement contradicts claims made by Tether for several years that every tether it issues is 100% backed by US dollars held in reserve.
Hoegner also claims that the New York Attorney General’s Office is interfering with the Tether’s attempts to loan Bitfinex money to ensure liquidity.
Hoegner produced the affidavit in response to an Ex-Parte order issued by the Attorney General of New York which compels iFinex to produce comprehensive records of its finances.
The company has also been ordered not to dispose of funds while under the order, which also alleges that iFinex has engaged in fraud by failing to disclose to the public an $850 million USD “loss” of funds.
Tether holds market share by a wide margin in the “stablecoin” milieu, and the company has been repeatedly accused of issuing an implausible number of tethers, possibly in order to manipulate crypto markets.
“Stablecoins” generally do not fluctuate much in value and have been used to cash in and out of crypto trading positions while avoiding the “taxable event” of cashing out into real-world currencies.
They can also be used for arbitrage between exchanges. This is advantageous because liquidity issues on exchanges have sometimes meant that certain coins may trade for significant premiums or more cheaply on rival exchanges.
Notably, Bloomberg Crypto tweeted yesterday that Bitcoins are now trading, “…at a more than $300 premium on Bitfinex amid speculation investors are exiting the Tether stablecoin.”
— Bloomberg Crypto (@crypto) April 30, 2019
“Market participants appear to understand that Tether is not at risk.”
“The Attorney General’s ex-parte, highly inflammatory, and misleading application was widely covered in the press, including an article in the Wall Street Journal…This coverage resulted in an approximate loss of $10 billion across dozens of cryptocurrencies within one hour.”
“Out of an abundance of caution, in or about January and February 2019, Bitfinex proactively and voluntarily informed the Office of the New York Attorney General (“OAG”), as well as various U.S. federal law enforcement agencies, of its issues and concomitant concerns with Crypto Capital.”