Tether's Trouble With New York Attorney General

Are Bitfinex and Tether in trouble? Maybe, but the thing is, we don't know just how much trouble, because the stablecoin issuer has challenged the New York State Office of the Attorney General's case against them.

While a New York judge has questioned the attorney general's "Vague, open-ended" claims and asked for a more precisely constructed revision, recent news surrounding the closing of a New York-based bank account indicates that Tether and Bitfinex may very well have been operating in the state of New York.

Even if iFinex held accounts with New York-based banks, there's still no guarantee the OAG can legally establish that Bitfinex and/or Tether were actually operating in New York and serving New York-based customers.

"The short answer is that it depends on what the company is doing and what jurisdictional hook the state uses to regulate the conduct. For any company, the outcome of this analysis will be very fact-dependent. To the extent there is any possible nexus with New York State, businesses really should confer with New York counsel for that advice."

It needs to be underlined that the attorney general is indeed making the claim that Bitfinex and Tether served New York-based customers and didn't only have bank accounts located in the state.

In its affirmation from early July, Assistant Attorney General Bryan M. Whitehurst wrote that "Documents obtained by the OAG in the course of its investigation demonstrate that Respondents did in fact allow customers located in New York to transact on the Bitfinex trading platform after January 30, 2017," which is when Bitfinex announced that it was officially barring New Yorkers from the exchange.

Proving an operational link with New York is one thing, but proving the defrauding of customers - which the Attorney General is ultimately attempting to substantiate - is another.

Still, even with this uncertainty, it's unlikely that the New York attorney general would have sued iFinex if it didn't believe it had a strong case, as suggested by Aaraon Kaplan, a former lawyer who is now the CEO of New York-based trading platform Prometheum.

"The outcome of the NY AG's case against Tether will be determined by the facts and circumstances. The attorney general tends to only bring cases they believe they have a good chance of winning. I anticipate that the NY Attorney General believes the state has a very strong case against Tether."

Taken together, the above observations point to two main points: 1) there isn't enough public evidence right now to conclude either way on whether iFinex defrauded New York-based customers; and 2) even if such evidence emerges and the New York OAG wins its case, the cryptocurrency industry will live on regardless.