Stablecoins—virtual currencies pegged to another asset, usually, the U.S. dollar—bring liquidity to crypto exchanges, especially those that lack ties to traditional banking. To put it more simply, if you are a crypto exchange and you don’t have access to real dollars, stablecoins are the next best thing.
Today, there are lots of stablecoins to choose from. But by far the most popular and widely traded is tether (USDT), issued by a company of the same name. Of the three stablecoin models, Tether follows the I.O.U. model, where virtual coins are supposed to represent actual money and be redeemable at any time. It all sounds well and good, but for one thing: How do we know that tether is fully backed?
Currently, there are 1.9 billion tether in circulation. That means, there should be a corresponding $1.9 billion tucked away in one or more bank accounts somewhere. Bitfinex, the crypto exchange closely linked to Tether, claims the money exists, but has yet to provide an official audit to support those claims. (We have seen snapshots of bank account balances at certain points in time, but these are not real audits.)
[Update: As of June 2019, there are $3.3 billion worth of tethers in circulation.]
More troubling still, the issuance of tether correlates with the rapid run up in price of bitcoin from April 2017 to December 2018 when bitcoin peaked at nearly $20,000. If authorities were to step in and freeze the bank accounts underlying tether, it is hard to guess what impact that could have on crypto markets at large.
A timeline of events reveals a full picture of the controversy surrounding Tether and Bitfinex, and provides a reference for anyone interested in researching the topic.
[An version of this timeline originally appeared in Bitcoin Magazine in February 2018. What follows is a more detailed and up-to-date version.]
2012 — iFinex Inc., the company that is to become the parent company for Bitfinex and Tether, is founded in Hong Kong.
2013 — Bitfinex incorporates in Hong Kong. The exchange is run by CSO Phil Potter, CEO Jan Ludovicus van der Velde and CFO Giancarlo Devasini. Potter used to work at Morgan Stanley in New York in the 1990s, but lost the job after bragging about his opulent lifestyle to the New York Times. And in 1996, Devasini was caught pirating and selling a substantial volume of Microsoft Software.
July 9, 2014 — Brock Pierce, Bitcoin Foundation director and former Disney child actor, launches Realcoin, a dollar-backed stablecoin. Realcoin is built on a Bitcoin second-layer protocol called Mastercoin (now Omni). Pierce was one of the founding members of the Mastercoin Foundation before resigning in July 2014. He founded Realcoin along with Mastercoin CTO Craig Sellars and ad-industry entrepreneur Reeve Collins.
September 5, 2014 — Appleby, an offshore law firm, helps Bitfinex operators Phil Potter and Giancarlo Devasini set up Tether Holdings Limited in the British Virgin Islands.
September 8, 2014 — Tether Limited registers in Hong Kong.
October 6, 2014 — The first tethers are issued, according to the Omni block explorer.
November 20, 2014 — Realcoin rebrands as “Tether” and officially launches in private beta. The company hides its full relationship with Bitfinex. A press release (archive) lists Bitfinex as a “partner.” In explaining the name change, project co-founder Reeve Collins tells CoinDesk the firm wanted to avoid association with altcoins.
February 25, 2015 — Tether begins trading, according to data from CoinMarketCap.
May 18, 2015 — Tether issues 200,000 tethers, bringing the total supply to 450,000.
May 22, 2015 — Bitfinex is hit with its first hack. The exchange claims it lost 1,500 bitcoin (worth $400,000 at the time) when its hot wallets are breached. The amount represents 0.05 percent of the company’s total holdings. Bitfinex says it will absorb the losses.
December 1, 2015 — Tether issues 500,000 USDT, bringing the total supply to roughly 950,000. (The price of bitcoin has remained stable throughout most of 2015, but climbs from $250 in October to about $460 in December.)
June 2, 2016 — The U.S. Commodity Futures Trading Commission fines Bitfinex $75,000 for offering illegal off-exchange financed retail commodity transactions in bitcoin and other cryptocurrencies and for failing to register as a Futures Commission Merchant as required by the Commodity Exchange Act. In response, Bitfinex moves its crypto funds from an omnibus account into multisig wallets protected by BitGo.
August 2, 2016 —Bitfinex claims it has been hacked again, when 120,000 bitcoin, worth about $72 million, vanish. This is one of the largest hacks in bitcoin’s history, second only to Mt. Gox. Bitfinex never reveals the full details of the breach.
(Chapter 8 of David Gerard’s book “Attack of the 50-Foot Blockchain” offers an in-depth explanation of the hack.)
August 6, 2016 — This time, Bitfinex is unable to absorb the losses. The exchange announces a 36% haircut for almost all of its customers. It even takes funds from those who were not holding any bitcoin at the time of the hack. In return, customers receive an I.O.U. in the form of BFX tokens, initially valued at $1 each.
August 10, 2016 — Zane Tacket, Bitfinex community director, writes on Reddit (archive) that Bitfinex is offering a bounty of 5% (worth up to $3.6 million) for any information leading to recovery of the stolen funds. Also on this day, Bitfinex resumes trading and withdrawals on its platform after having been shut down for a week after the heist.
August 17, 2016 — Bitfinex announces it is engaging Ledger Labs, the blockchain forensic firm founded by Ethereum creator Vitalik Buterin, to investigate its recent breach. Bitfinex hires Ledger to do a computer security audit, but it leads customers into believing Ledger is going to perform a financial audit as well. A financial audit is key to knowing whether Bitfinex was even solvent at the time of the hack.
In a blog post (archive) Bitfinex writes:
“We are also in the process of engaging Ledger Labs to perform an audit of our complete balance sheet for both cryptocurrency and fiat assets and liabilities.”
A footnote added to the blog post on April 5, 2017 makes a correction:
“Ledger Labs has not been engaged to perform a financial audit of Bitfinex. When in initial discussions with Ledger Labs in August 2016, we had initially understood that they could offer this service to us…. We are in the process of engaging a reputable, third party accounting firm to audit our balance sheet, but this continues to take longer than anticipated and than we would want. We apologize for any confusion in this matter.”
October 12, 2016 — Bitfinex tries to reach out to the hacker by offering secure communication channels. In a blog post (archive), titled “Message to the individual responsible for the Bitfinex security incident of August 2, 2016,” Bitfinex writes “We would like to have the opportunity to securely communicate with you. It might be possible to reach a mutually agreeable arrangement in exchange for an enormous bug bounty.” It is not clear why a hacker would be interested in such an offer.
October 13, 2016 — Bitfinex announces (archive) that its largest BFX token holders have agreed to exchange over 20 million BFX tokens for equity shares of iFinex. You can hardly blame Bitfinex customers for taking the bait. Many have already watched BFX tokens drop far below $1. One Redditor even reported the price dropping to $0.30.
The incentive looks like this: If you convert your BFX to iFinex shares before October 7, you get one RRT for each BFX token converted. Convert between October 8 and November 1, and you get half an RRT for each BFX token converted. After that, you get 1/4 of an RRT per BFX token converted. No further RTTs are given after November 30.
December 31, 2016 — In the year 2016, Tether issued 6 million USDT, six times what it issued the prior year.
March 31, 2017 — Wells Fargo cuts off services to Bitfinex and Tether, according to court documents in a lawsuit that Bitfinex later files against the bank. Bitfinex is not a direct customer of Wells Fargo, but rather a customer of four Taiwan-based banks that use Wells Fargo as an intermediate to facilitate wire transfers.
April 3, 2017 — In a blog post (archive), Bitfinex announces plans to redeem any outstanding BFX tokens. “After these redemptions, no BFX tokens will remain outstanding; they will all be destroyed,” the exchange says.
Meanwhile, Potter reveals in an audio that all of the remaining BFX tokens have been converted to tethers. Effectively, this means that none of the victims of the Bitfinex hack in August 2016 got back any of their original funds. Instead, they were all compensated with BFX tokens, RRT tokens and tethers in a trail of tokens that is difficult to follow.
April 5, 2017 — Two days after announcing it has “paid off” all its debt to customers, Bitfinex files a lawsuit against Wells Fargo for interrupting its wire transfers. Tether is listed as a plaintiff. In addition to an injunction order, Bitfinex seeks more than $75,000 in damages. (See here for a complete list of documents associated with the lawsuit.)
April 10, 2017 — A pseudonymous character known as “Bitfinex’ed” debuts online. In a relentless series of tweets, he begins accusing Bitfinex of creating tethers out of thin air to pay off debts. At this point, the number of USDT in circulation is 55 million, and the price of bitcoin has begun a steep ascent that will continue to the end of the year.
April 11, 2017 — Bitfinex withdraws the lawsuit against Wells Fargo. In an audio, Potter admits the lawsuit was frivolous, stating the company was only hoping to “buy time.”
April 17, 2017 — Following a notice about wire delays, Bitfinex announces (archive) it has been shut off by its four main Taiwanese banks: Hwatai Commercial Bank, KGI Bank, First Commercial Bank, and Taishin Bank. Bitfinex is now left to move between a series of banks in other countries without telling its customers where it is keeping its reserves.
In an audio, Bitfinex CSO Phil Potter tries to calm customers by telling them that Bitfinex effectively deals with this sort of thing by setting up shell accounts and tricking banks.
“We’ve had banking hiccups in the past, we’ve just always been able to route around it or deal with it, open up new accounts, or what have you…shift to a new corporate entity, lots of cat and mouse tricks.”
Around this time, Bitfinex also begins to rely increasingly upon Crypto Capital, a third-party payment processor based in Panama.
April 24, 2017 — Tether’s dollar peg is maintained via market making and instilling confidence in the value of the coin. Amidst reports that Bitfinex had been cut off from Wells Fargo and shut off from Taiwanese banks, USDT temporarily dips to $0.91.
May 5, 2017 — After finally clarifying (archive) to customers that it only engaged Ledger Labs for a security audit—not a financial audit—Bitfinex hires accounting firm Friedman LLP to complete a comprehensive balance sheet audit. “A third-party audit is important to all Bitfinex stakeholders, and we’re thrilled that Friedman will be helping us achieve this goal,” Bitfinex writes in a blog post (archive).
August 5, 2017 — Bitfinex’ed publishes his first blog post “Meet ‘Spoofy.’ How a Single Entity Dominates the Price of Bitcoin.” The post explains how an illegal form of market manipulation known as spoofing works. In it, a video shows a Bitfinex trader putting up a large order of bitcoin just long enough to push up the price of bitcoin.
This is not the first time a crypto exchange has manipulated the price of bitcoin. Mt. Gox, the now-defunct Tokyo exchange that handled 70% of all bitcoin transactions before it collapsed in 2014, also manipulated its markets. Former Mt. Gox CEO Mark Karpeles admitted in court to operating a “Willy Bot.” An academic paper titled “The Willy Report” shows how the bots were responsible for much of bitcoin’s 2013 price rise.
September 28, 2017 — Friedman LLP issues a report alleging that Tether’s US dollar balances ($443 million) match the amount of tethers in circulation at the time. Falling short of an audit, the report does not disclose the names or the locations of banks.
According to the report, “FLLP did not evaluate the terms of the above bank accounts and makes no representations about the Client’s ability to access funds from the accounts or whether the funds are committed for purposes other than Tether token redemptions.”
August 7, 2017 — In a blog post (archive), Bitfinex announces that over the next 90 days, it will gradually discontinue services to its U.S. customers. Effective almost immediately, U.S. citizens are no longer able to trade Ethereum-based ERC20 tokens, which are commonly associated with initial coin offerings (ICOs).
The news follows regulatory crackdowns in the U.S. (The previous month, the U.S. Securities and Exchange Commission issued an investigative report that deemed that tokens issued by the DAO—an investor-directed fund built on top of Ethereum that crashed spectacularly—were securities.)
November 7, 2017 — Leaked documents dubbed “The Paradise Papers” reveal Bitfinex and Tether are run by the same individuals. Up until now, Tether and Bitfinex insisted the two operations were separate, though they were widely suspected to be the same.
November 19, 2017 — Tether is hacked when 31 million tether are moved from the Tether treasury wallet into an unauthorized Bitcoin address. Tether initiates a hard fork to prevent those funds from being spent.
After this hack, Tether notes on its website (archive) that redemption of USDT for real dollars is no longer possible via the Tether website. (It is worth noting that there is no record of anyone having redeemed their USDT for dollars at any point before this either.)
“Until we are able to migrate to the new platform, the purchase or sale of Tether will not be possible directly through tether.to. For the time being, though, we invite you to use the services of any one of a dozen global exchanges to acquire or dispose of Tethers for either USD or other cryptocurrencies. Such exchanges and other qualified corporate customers can contact Tether directly to arrange for creation and redemption. Sadly, however, we cannot create or redeem tether for any U.S.-based customers at this time.”
November 30, 2017 — Bitfinex hires 5W, a scrappy New-York public relations firm led by Ronn Torossian. 5W promptly issues a press release saying that an “audit” from Friedman LLP is forthcoming. The agency also tells journalists they can view Bitfinex’s bank accounts if they sign an non-disclosure agreement first. No journalist takes the bait.
December 4, 2017 — Bitfinex hires law firm Steptoe & Johnson and threatens legal action against critics. The exchange does not specify who exactly those critics are, but the obvious target is Bitfinex’ed, the cynical blogger, who continues to accuse Bitfinex of manipulating markets and printing more tether than it can redeem.
December 6, 2017 — The U.S. Commodity and Futures Trading Commission subpoenas Bitfinex and Tether, Bloomberg reports. The actual documents are not made public.
December 16, 2017 — The price of bitcoin reaches an all-time high of nearly $20,000, marking the end of a spectacular run-up. A year prior, one bitcoin was only $780.
December 21, 2017 — Without making any formal announcement, Bitfinex appears to suddenly close all new account registrations. Those trying to register for a new account are asked for a mysterious referral code, but no referral code seems to exist.
December 31, 2017 — In the year 2017, Tether issued roughly 1.4 billion USDT.
January 3, 2018— A change to Tether’s legal terms of service (archive) states: “Beginning on January 1, 2018, Tether Tokens will no longer be issued to U.S. Persons.”
January 12, 2018 — After a month of being closed to new registrations, Bitfinex announces it is reopening its doors, but now requires new customers to deposit $10,000 in fiat or crypto before they can trade. Bitfinex does not officially say this, but customers also can no longer make fiat withdrawals of less than $10,000 either.
January 27, 2018 — Tether parts ways with accounting firm Friedman LLP. There is no official announcement—Friedman simply deletes all mention of Bitfinex from its web site, including past press releases.
A Tether spokesperson tells CoinDesk: “Given the excruciatingly detailed procedures Friedman was undertaking for the relatively simple balance sheet of Tether, it became clear that an audit would be unattainable in a reasonable time frame.”
January 31, 2018 — As the price of bitcoin plummets, tether issuance takes on a rapid, frenzied pace. In January, Tether issues 850 million USDT, more than any single month prior. Of this, roughly 250 million were created during a mid-month bitcoin price crash.
February 2018 — an ex-NFL owner named Reginald Fowler registers a company called Global Trading Solutions LLC. He goes on to set up bank accounts under the company’s name at HSBC. (Pay attention to these names. They are about to become very important.)
March 28, 2018 — Bitfinex weighs a move to Switzerland. Bitfinex CEO Jean-Louis van der Velde tells Swiss news outlet Handelszeitung, “We are looking for a new home for Bitfinex and the parent company iFinex, where we want to merge the operations previously spread over several locations.”
February 20, 2018 — Dutch bank ING confirms Bitfinex has an account there. Two members of parliament in the Netherlands lodge questions for the finance minister after Dutch news site Follow The Money first disclosed the relationship on February 14.
May 23, 2018 — Phil Potter steps down from his role as Bitfinex chief strategy officer. “As Bitfinex pivots away from the U.S., I felt that, as a U.S. person, it was time for me to rethink my position as a member of the executive team,” he says in a statement.
May 24, 2018 — Bloomberg confirms previous speculations that Bitfinex has been banking at Puerto Rico’s Noble Bank since 2017. Tether founder Brock Pierce is a cofounder of Noble Bank, along with John Betts, a former Wall Street executive.
These individuals had past dealings. In 2014, Betts led a group called Sunlot Holdings to try and acquire the failed Mt. Gox exchange. Pierce, along with former FBI director Louis Freeh were also involved in that effort. (Freeh’s name will appear again on this timeline.)
May 24, 2018 — The U.S. Justice Department launches a criminal probe into bitcoin markets. The focus is on practices like spoofing and wash trading, where a trader simultaneously buys and sells assets to increase trading volume. The criminal probe will bring in other agencies, including the CFTC.
June 1, 2018 — Looking to reassure its customers, Bitfinex hires Freeh Sporkin & Sullivan (FSS), a law firm co-founded by Louis Freeh (yes, the same Freeh who held an advisory role at Sunlot Holdings) to confirm that Tether has $2.55 billion in its banks, enough to cover the USDT in circulation at the time.
FSS is not an accounting firm and this is in no way an official audit. Furthermore, there may be a conflict of interest here. Eugene Sullivan, senior partner at FSS, is also an advisor to Noble Bank, where Bitfinex/Tether does its banking.
“The bottom line is an audit cannot be obtained,” Stuart Hoegner, Bitfinex and Tether’s general counsel, tells Bloomberg. “The big four firms are anathema to that level of risk…. We’ve gone for what we think is the next best thing.”
June 25, 2018 — Bolstering suspicions that tether is being used to prop up the price of bitcoin, two researchers—John Griffin and Amin Shams—at the University of Austin, Texas, release a paper titled “Is Bitcoin Really Un-Tethered?” The two write:
“Using algorithms to analyze the blockchain data, we find that purchases with tether are timed following market downturns and result in sizable increases in bitcoin prices.”
June 27, 2018 — Several Bitfinex customers report delayed and rejected wire deposits. A representative of Bitfinex named “Garbis” takes to Reddit (archive) to explain that the situation was caused by a change in banking relations.
October 1, 2018 — Reports circulate that Noble Bank is up for sale, as a result of having lost several of its big customers, including Bitfinex and Tether. (I don’t know this for sure, but my guess is that Noble’s custodial bank in New York likely told Noble to end its relationship with Bitfinex.)
October 6, 2018 — According to a report in The Block, Bitfinex appears to be banking at HSBC—a bank that has previously been fined $1.9 billion in 2012 for money laundering—under the shell account “Global Trading Solutions.”
October 7, 2018 — Bitfinex pushes back on claims that it is insolvent. “Bitfinex is not insolvent, and a constant stream of Medium articles claiming otherwise is not going to change this,” Bitfinex writes in a blog post (archive). As proof, it publishes three bitcoin cold wallet addresses that collectively hold about $1.5 billion in assets.
October 10, 2018 — Four days after reports comes out that Bitfinex is banking at HSBC, Bitfinex temporarily suspends all cash deposits, suggesting that the exchange is once again on the hunt for a new reserve bank.
October 14, 2018 — Amid concerns over Tether’s solvency and the company’s ability to establish banking relationships, tether’s peg slips again, this time to $0.92, according to CoinMarketCap, which aggregates prices from major exchanges. On a single crypto exchange Kraken, tether momentarily slips to $0.85.
October 16, 2018 — Tether appears to be holding reserves at Bahamas’ Deltec Bank. According to earlier rumors, the bank account was set up by Daniel Kelman, a crypto lawyer who was actively involved in trying to free the remaining Mt. Gox funds.
Further, Bitfinex appears to be banking through the Bank of Communications under “Prosperity Revenue Merchandising,” a shell company created June 5, 2018. The Hong Kong bank is owned in part by HSBC and uses Citibank as an intermediate to send deposits to Deltec in the Bahamas.
October 24, 2018 — In a blog post (archive), Tether announces it has “redeemed a significant amount of USDT” and will now burn 500 million USDT, representing those redemptions. According to the firm, the remaining 446 million USDT in its treasury will be used as a “preparatory measures for future USDT issuances.”
November 1, 2018 — Tether confirms it is banking with the Deltec in the Bahamas and provides an attestation letter from the bank that the account holds $1.8 billion, enough to cover the amount of tether in circulation at the time. The attestation has a mysterious squiggly signature at the bottom with no name attached to it.
November 30, 2018 — Recall that in May 2017, the U.S. Department of Justice together with the U.S. Commodity and Exchange Commission (CFTC) began looking into illegal manipulation of bitcoin prices. And then in December 2017, the CFTC subpoenaed both Tether and Bitfinex. Now federal prosecutors have supposedly “homed in on suspicions that a tangled web involving Bitcoin, Tether and crypto exchange Bitfinex might have been used to illegally move prices,” according to Bloomberg.
November 27, 2018 — In a blog post (archive), Tether says its customers can once again redeem tether for actual dollars. But again, there are no reports or evidence of anyone having been able to redeem tether ever.
December, 18, 2018 — Bloomberg reports it has seen Tether bank statements from accounts at Puerto Rico’s Noble Bank and the Bank of Montreal, taken over four separate months. The article suggests that Tether held sufficient dollars to back the tether tokens on the market. But again this is not a real audit. What stands out is that $61 million in the Bank of Montreal is listed under Stuart Hoegner, the firm’s general counsel.
December 31, 2018 — In the year 2018, Tether issued more than 1 billion tether.
January 16, 2019 — Bitfinex opens a data center in Switzerland, according to Swiss news outlet Handelszeitung. The report states that previously, Bitfinex was relying on Amazon cloud servers.
February 25, 2019 — In a blog post (archive), Bitfinex claims the U.S. government has located 27.7 BTC (worth about $100,000) taken from Bitfinex in the August 2016 hack and returned the funds to Bitfinex. The exchange says it has converted those bitcoin into USD and distributed the money to its RRT token holders. What is odd here is that the U.S. Department of Justice hasn’t issued any statement about recovered bitcoin. And Bitfinex doesn’t share a transaction record to show it actually received the recovered funds.
February 26, 2019 — Tether admits, for the first time, that it is operating a fractional reserve. An update on the company’s website reads:
“Every tether is always 100% 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, which may include affiliated entities (collectively, “reserves”). Every tether is also 1-to-1 pegged to the dollar, so 1 USD₮ is always valued by Tether at 1 USD.”
Here is what the text read before:
“Every tether is always backed 1-to-1, by traditional currency held in our reserves. So 1 USD₮ is always equivalent to 1 USD.”
The change is also updated in Tether’s legal section.
April 9, 2019 — The $10,000 minimum equity requirement to start trading has been lifted. “We simply could not ignore the increasing level of requests for access to trade on Bitfinex from a wider cohort than our traditional customer base,” CEO Jean-Louis van der Velde says in a blog post (archive). Meanwhile, customers continue to complain that they are unable to get cash off of the exchange. And now some are saying they are having trouble getting their crypto off the exchange as well.
April 11, 2019 — Bitfinex enables margin trading on tether. Margin pairs include BTC/USDT and ETH/USDT.
On this same day, Reginald Fowler, an Arizona man, and Ravid Yosef, who lives in Los Angeles and Tel Aviv, are indicted in the US for charges related to bank fraud. The two were allegedly part of a scheme that involved setting up bank accounts under false pretenses to move money on behalf of series of cryptocurrency exchanges. (CoinDesk)
April 17, 2019 — Tether goes live on the Tron network as a TRC-20 token, a standard used by the Tron blockchain for implementing tokens, similar to and compatible with Ethereum’s ERC-20 standard. You can view the issuance on Tronscan.
April 24, 2019 — The New York Attorney General’s (NYAG) office sues iFinex, the parent company of Bitfinex and Tether, saying that the company has been commingling client and corporate funds to cover up $850 million in missing funds.
From 2014 to 2018, Bitfinex placed over $1 billion with Crypto Capital because it was unable to find a reputable bank to work with it. Crypto Capital then either lost, stole, or absconded with $850 million.
In order to fill the gap, Bitfinex dipped into Tether’s reserves for hundreds of millions of dollars. According to the NYAG, “Despite the sheer amount of money it handed over, Bitfinex never signed a contract or other agreement with Crypto Capital.”
April 26, 2019 — In a response to OAG’s allegations, Bitfinex says the $850 million has not been lost, but rather “seized and safeguarded.” Meanwhile, according to CoinDesk, Zhao Dong, a Bitfinex shareholder, claims that Bitfinex CFO Giancarlo Devasini told him that the exchange just needs a few weeks to unfreeze the funds.
April 30, 2019 — In response to the NYAG’s ex parte order, Tether general counsel Stuart Hoegner files an affidavit accompanied by a motion to vacate from outside counsel Zoe Phillips of Morgan Lewis. Hoegner admits 2.8 billion worth are only 74% backed. Morgan says New York has no jurisdiction over Tether or Bitfinex’s actions.
On this same day, Reginald Fowler is arrested in Chandler, Arizona.
May 2, 2019 — The U.S. Government wants Fowler held without bail due to flight risk.
May 3, 2019 — The NYAG files an opposition to Bitfinex’s motion to vacate. Bitfinex follows two days later with a response to the opposition. In the memo, Bitfinex argues that “nothing in the Attorney General’s opposition papers justifies the ex parte order having been issued in the first place.”
May 8, 2019 — iFinex has a new plan to raise $1 billion: a token sale. The company releases a white paper for a new LEO token. Each token is worth 1 USDT.
On this same day, Reginald Fowler, the man linked to $850 million in missing Bitfinex funds, is out on $5 million bail. He is required to give up his passport. Bail is posted in the Southern District of New York, where he is to appear for arraignment on May 15. His travel is restricted to parts of New York and Arizona.
May 6, 2019 — New York Supreme Court judge Joel M. Cohen rules that the OAG’s ex parte order should remain in effect, at least in part. However, he thinks the injunction is “amorphous and endless.” He gives the two parties a week to work out a compromise and submit new proposals for what the scope of the injunction should be.
May 13, 2019 — Attorneys for the OAG and iFinex failed to come to a consensus on what Tether should be allowed to do with its holdings. They both submit separate proposals. iFinex is asking for a 45-day limit on the injunction and it wants Tether employees to get paid using Tether’s reserves. The OAG is not opposed to Tether’s employees being paid, but it wants Tether to to pay its employees using transaction fees—not reserves.
May 16, 2019 — Judge Cohen grants Bitfinex’s motion to modify a preliminary injunction. The preliminary injunction is limited to 90 days, and Tether is allowed to use its reserves to pay its employees. The judge holds that the Martin Act “does not provide a roving mandate to regulate commercial activity.” Bitfinex and Tether still have to handover documents that the OAG requested in its November 2018 investigative subpoena.
May 21, 2019 — Bitfinex files a motion to dismiss the proceeding brought by the NYAG on the grounds that Bitfinex/Tether do not do business in NY, the Martin Act does not apply to its business and the Martin Act cannot be used to compel a foreign corporation to produce documents stored overseas. Bitfinex and Tether also sought an immediate stay of the NYAG’s document demands.
May 22, 2019 — Judge Joel M. Cohen of the New York Supreme Court grants Bitfinex’s motion for an immediate stay of the document demands. He issues an order requiring the companies to produce only documents relevant to the limited issue of whether there is personal jurisdiction over the companies in New York but staying the document order in all other respects. The NYAG has until July 8 to file a response. And the judge schedules a hearing on the motion to dismiss for July 29.
July 8, 2019 — The NYAG has filed its response.
# # #
I put a lot of work into maintaining this timeline. If you are an investigator or a reporter who has benefited from this work—or just another obsessed Bitfinex follower—please consider making a small donation via Patreon.