What comes across as a fascinating update as per the latest reports doing the rounds, Tether has confessed to having invested a part of its reserves into the world’s #1 digital currency Bitcoin as well as other assets.
These facts were revealed by the company’s lawyer during the ongoing court proceedings looking over the operations of Tether, a Stablecoin, and Bitfinex, a Hong Kong-based digital currency exchange which is an associated company of Tether.
According to the documents furnished by Bitfinex’s attorney David Miller, dated 16th of May, Tether did invest a small part of its reserves into BTC. He elaborated saying that before the order released on 24th April, Tether made investments that were beyond cash as well as cash equivalents, Bitcoin included. They did buy bitcoin, the documents clearly declared. Miller continued saying that the company also indulged in making other investments, which includes buying other assets.
However, Tether’s decision to make investments into volatile assets such as Bitcoin seemed confusing to the crypto community, including Joel M. Cohen, the Judge at the New York Supreme Court. Cohen doubted Tether’s logic behind this investment by questioning if Tether was backed by BTC then how it can be consistent.
The Judge, in an interesting turn of events, has granted permission to Tether to invest in other assets after the 16th May court hearing. But the permission does come with a preliminary injunction which orders Bitfinex and Tether to –
- Restrain credit line access on USD reserves that Tether holds
- Not alter any document that the New York Attorney General requested
- Bitfinex agents, principals, and executives will not be eligible to receive dividends or distribution from the funds obtained from Tether
This injunction lasts 90 days, although a further extension of 14 days can be filed by the NYAG.
For those who came in late, both Bitfinex and Tether were taken to court by the NYAG on 24th April 2019 post the revelation that Bitfinex had lost 850 million dollars and utilized Tether’s funds to cover up for the losses. At the time, Tether lawyers also admitted that Tether’s tokens didn’t come with complete reserve backing. Only 74% of tokens were backed by other reserves and fiat currency.