On 25 April 2019 New York Attorney General Letitia James announced that her office had obtained a court order under the Martin Act against iFinex (Bitfinex) and Tether Limited and related entities. The papers say Bitfinex no longer had access to more than $850 million of commingled client and corporate funds placed with a Panamanian processor, Crypto Capital Corp., and had not told customers. To plug the hole, the same people who run both shops had given Bitfinex a line of credit on Tether’s cash reserves — up to about $900 million — the cash Tether had long described as backing tethers one-to-one. The order aimed to stop further draining of those reserves and to compel documents.
A 2021 $18.5 million settlement is later. USDC’s 2018 launch is a different issuer’s product. Circle’s IPO is 2025. This page is the April order.
What happened
A trading venue and a dollar-token issuer under common control used the token’s cash pile as a credit line after a processor stopped returning dollars. “Fully backed” is a sentence about a bank account, a loan book, and who may draw on it. It is not a smart-contract invariant. Bitfinex customers waiting on withdrawals were waiting on that company.
Why it matters
If you hold a dollar token, you hold a claim on an issuer. See stablecoins: useful, not magic. A print that wobbles on this news is people repricing that claim. It is not bitcoin’s issuance breaking. We will not tell you which token to prefer.
What happens next
Motions, redacted banking details, and years of attestations that still are not an audit you can sue like a 10-K. Nothing here is legal advice, and it is not an instruction to buy, sell, or hold tether, bitcoin, or a Bitfinex account.
