A New York Court has granted a motion to change the scope of the preliminary ruling made against Bitfinex on 25 April.
Accused of colluding with stablecoin operator Tether to cover up a loss of $850 million, a court order was obtained that stopped both parties from partaking in ongoing activities that could breach New York Law.
According to documents filed at the time, the exchange platform had transferred the sum of client and corporate funds to a company in Panama and it is alleged that there was no evidence of any contracts or assurances for the transfer.
It is claimed that Bitfinex failed to disclose the loss to investors but instead carried out a number of transactions with Tether to cover up the loss and plug the gap.
Bitfinex responded to the claim by saying that the court documents were riddled with false assertions and stating that the money was not lost but was being “safeguarded”.
Joel M.Cohen, a Supreme Court Judge ruled that the New York Attorney General Letitia James “has made a sufficient showing to warrant a targeted preliminary injunction preventing Respondents from continuing to let dollars flow out of Tether’s reserves via the type of extraordinary transaction that triggered Petitioner’s concern.”
The judge stated that “respondents were not given prior notice of the application” and that the order was “based solely on the OAGs presentation of facts and law”. Having now heard both sides of the story, Cohen granted the Respondents’ motion and ruled that the preliminary injunction should be modified.
The motion also states that the previous ruling was vague and overboard with its restrictions and that it should not impact Bitfinex’s ordinary course of commercial activity.
“The Court finds that the preliminary injunction should be tailored to address OAG’s legitimate law enforcement concerns while not unnecessarily interfering with Respondents’ legitimate business activities. The Petitioner [NYAG] contends that she does not intend to restrict Respondents’ ordinary course of business activities, but the existing language creates a risk of doing just that.”
Bitfinex are now required to provide additional information and evidence for the NAYG investigation. Both Bitfinex and Tether have been ordered to restrict access to credit lines on USD reserves that are held by Tether, as well as not allowing any distribution of dividends to executives, principals, or agents of Bitfinex.
Bitfinex responded to the news in a blog post, stating that: This order is a victory in the ongoing defense of our business against the New York Attorney General’s office. We are grateful that Judge Cohen recognized, in argument before his court, that the original injunction obtained by the New York Attorney General was “both amorphous and endless,” and that it needed to be “as narrow as possible. We will vigorously defend against any action by the New York Attorney General’s office, and we remain committed, as ever, to protecting our customers, our business, and our community against their meritless claims.”