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Does NY Attorney General Have a Strong Case Against Bitfinex? New Reports Come To Light

Bitfinex and QuadrigaCX were the two biggest Exchange related issues that came to light his year. Post the obituary of QuadrigaCX CEO, Gerald Cotten, about 190$ in cryptocurrencies have been declared ‘lost forever’ as it was stored in the cold wallets of Cotten.

With Bitfinex, it has been accused of mismanaging and then covering up nearly $850 million using the stablecoin, USDT. Together the value of the funds and cryptocurrencies amount to $1.04 billion. Moreover, Bitfinex has maintained a ‘not guilty’ stand and stated that the funds are not lost but are seized and safeguarded.

Also Read: Bitfinex Vs. New York AG Case: $850 Million Lost? Here are the Facts and Updates

Who Seized Their Funds and Why?

While Bitfinex has not yet mentioned who or why the funds were seized, it remains to be the most significant question mark on their statement released on 26th April 2019. The Attorney General of New York City accused the Exchange of having lost the funds. However, the firm replied that the funds are not lost but “seized and safeguarded.”

Crypto Capital has ‘not‘ been named as a defendant in the Bitfinex case yet it seems that Crypto Capital actually has access to or had last access to the deposit worth $850 million. The AG of NY has accused the firm that 850$ worth of USDT being traded on Bitfinex since last year has no custody or deposit of any kind is backing the US dollar stablecoin. Necessarily, if everyone tries to take out their withdrawals from the Exchange, the users would probably find themselves highly disappointed.

Furthermore, QuadrigaX also had ties with Crypto Capital. According to sources, Crypto Capital was providing service to QuadrigaX as well. Cotten wrote in a May 17, 2018 email to Bloomberg:

“Companies such as Crypto Capital have proven useful in the sense that they operate as a payment processor that is able to receive transfers from clients, store funds and then process outgoing transactions as well,”  He added that, “Crypto Capital is one such company that we have/do use. In general, it works well, though there are occasionally hiccups.”

Since most of the regulated banks have denied service to Cryptocurrency Exchange, to manage their deposits, Exchanges have had to resolve to private firms like Crypto Capital. It is a Panama-based private firm that has ties with banks globally. According to sources, the retail customers of the firm were told to make deposits to Poland, Portugal, and other locales.

Hence, Crypto Capital is the missing link in the case that supposedly has more answers than the Exchanges itself. Attorney General of NY, Letitia James, has accused Bitfinex of creating an “illusionary” credit of USDT cryptocurrency on its exchange when in fact the money was a ‘loan’ made by Tether to Bitfinex worth $625 million.

Moreover, while the Exchange maintains a non-guilty stand, the funds are not accessible to it at the moment. Hence, the Attorney General of New York looks like having a solid case against the Exchange. The case is “In the Matter of the Inquiry by Letitia James, Attorney General of the State of New York v. Bifinex Inc., 450545/2019”, New York Supreme Court, County of New York.

Do you think that Bitfinex Exchange users will run into deeper problems because of the Court Case? Please share your views with us. 

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