Bitfinex: ‘New York Customers’ Cited by NYAG Are Foreign Entities

Arguments that Bitfinex and Tether served New York residents through 2018 are misleading, new legal filings by the companies claim.

A new affirmation by Bitfinex and Tether general counsel Stuart Hoegner says a previous filing by the New York Attorney General’s office claiming that Empire State residents used the companies’ platforms for far longer than previously stated “contain a number of inaccurate and misleading assertions.”

According to Hoegner, some documents presented as evidence by the NYAG which appear to outline how New York residents could trade on Bitfinex “make clear that we would only do business with a foreign entity having no presence in New York,” while other documents describing Bitfinex customers based out of New York were actually about “foreign ECPs [eligible contract participants].”

These foreign ECPs, according to Hoegner, include former Fortress partner Mike Novogratz’s Galaxy Digital, which has an address listed in New York City.

Other traders listed as being New York residents were also nonetheless “foreign ECPs,” Hoegner claims.

Moreover, Bitfinex ceased serving New York residents in January 2017 and all U.S. residents in August that same year, Hoegner claims. He added that all U.S.-based entities and corporate customers were banned a year later.

Other arguments

A separate filing by Bitfinex and Tether’s attorneys argues that the New York Supreme Court should dismiss the case because the NYAG’s office did not serve papers to Bitfinex, Tether, or the other affiliated companies in time according to law; the companies “have not purposefully availed themselves of doing business in New York”; USDT is not a security or commodity as defined by the state’s Martin Act; and the law the NYAG’s office is citing does not apply.

The filing also argues that the NYAG is wrong to claim jurisdiction on the grounds that New York residents may have utilized Bitfinex’s platform through the summer of 2018, since this period ends well before the exchange first lost access to its funds in October 2018, which is the main issue the NYAG’s office is purportedly looking into.

The case began in April 2019, when the NYAG’s office filed a complaint against Bitfinex, Tether and other affiliated companies, claiming that Bitfinex covered up the loss of $850 million by borrowing from Tether’s reserve.

Tether, issuer of the ostensibly dollar-backed stablecoin USDT, extended a $900 million line of credit to Bitfinex, though the crypto exchange did not borrow the full sum before a judge issued a temporary injunction freezing the movement of funds from the stablecoin issuer.

Attorneys for Bitfinex and Tether claim that the decision to extend the line of credit was made independently, although the companies share executives and owners.

Monday’s documents are aimed at supporting Bitfinex and Tether’s motion to dismiss the NYAG’s case. The parties are due back in court on July 29.

New York Supreme Court image via Nikhilesh De for CoinDesk