Bitcoin drops 7 per cent on allegations of $850m fraud by Bitfinex by New York Attorney General

www.theregister.co.uk | 3/7/2019 | Staff
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The price of Bitcoin has dropped seven per cent after New York's Attorney General accused leading exchange Bitfinex of trying to hide $850m in missing funds.

The accusation came in a legal filing [PDF] on Thursday that claims Bitfinex raided the reserves of Tether - a digital currency that is kept at parity with the US dollar in order to allow traders to switch easily between real and virtual currencies – in order to make up the massive shortfall.

Tether - Bitfinex - Tax - Haven - Virgin

Both Tether and Bitfinex are headquartered in the tax haven of the British Virgin Islands and, according to the NY Attorney General, are owned and run by the same group of executives and staff.

Bitfinex is one of a limited number of bitcoin exchanges that allow people both to buy bitcoin and trade it for traditional real-world currencies, including the US dollar, British pound, Japanese yen and euros. As such, it needs to hold sufficient deposits in those currencies to serve customer demand.

Tether - Stablecoin - Company - Tether - Coin

Tether is a so-called "stablecoin" and the company claims that every Tether virtual coin is backed by a dollar held in reserves, the idea being that people can be assured of its stability.

But last month, on March 4, the NY Attorney General notes that Tether changed that assurance to note that "every Tether is always 100 per cent backed by our reserves, which include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties."

Coincidence - Office - NY - Attorney - General

It is not a coincidence that the Office of the NY Attorney General (OAG) opened an investigation into both Bifinex and Tether in November 2018 and has been digging into transactions between them, issuing subpoenas and finally meeting with executives face-to-face in mid-February.

As part of that investigation, the OAG uncovered documents that purportedly show that...
(Excerpt) Read more at: www.theregister.co.uk
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