iFinex (the parent company of Bitfinex and Tether) filed a motion in July to dismiss the lawsuit against the company as the New York Attorney General (NYAG) Letitia James doesn’t have jurisdiction over them in this case. On August 19, the Supreme Court dismissed the motion and ruled that the NYAG has jurisdiction over the cryptocurrency exchange Bitfinex.
The Supreme Court Judge Joel M. Cohen ordered the NYAG to continue her investigation of the company over the allegations of fraud and violation of securities laws. Moreover, Bitfinex and the stablecoin issuer Tether (USDT) must abide by the court’s order to turn over documents regarding their relationship and the deal within 90 days.
The suit against Bitfinex was filed under the Martin Act, a New York anti-fraud law. The New York Attorney General sued Bitfinex over allegations of covering up the $850 million loss held by a payment processor Crypto Capital. Bitfinex and Tether are being accused of negotiating a line of credit, enabling Bitfinex to access $700 million in Tether’s reserves. Bitfinex would have borrowed another $200 million but an injunction imposed by Cohen in May stopped it.
According to Olta Andoni, a professor at the Chicago-Kent College of Law and head of Ziliak Law’s blockchain practice, the order was not unexpected. Even if the New York Supreme Court delayed the ruling on the suit in July, the case against Bitfinex is strong. He said that this ruling must be very unpleasant for Bitfinex, especially because the crypto entities were considering the court’s order to grant thhem a stay as their victory.
When iFinex filed a motion that accused the NYAG of not having the proper jurisdiction, the NYAG responded by asserting that it would be premature for the Supreme Court to determine whether it has jurisdiction to issue orders, impacting the rights of respondents during the investigation. The Court disagreed that it would be premature to rule on jurisdiction and ruled that the New York Attorney General has jurisdiction and authority to prosecute this matter.
Now a legal war between Bitfinex and the New York state’s prosecutors has broken out. After July’s hearing, iFinex claimed it has already invested over $500,000 and hired over 60 lawyers to abide by the documentation requests by the NYAG.