|Bitcoin Drops 7 Percent On Allegations of $850 Million Fraud By Bitfinex By New York Attorney General|
The price of Bitcoin has dropped seven per cent after New York's Attorney General accused leading exchange Bitfinex of trying to hide $850 million in missing funds. The accusation came in a legal filing [PDF] on Thursday that claims Bitfinex raided the reserves of Tether -- a digital currency that is kept at parity with the U.S. dollar in order to allow traders to switch easily between real and virtual currencies -- in order to make up the massive shortfall. Both Tether and Bitfinex are headquartered in the tax haven of the British Virgin Islands and, according to the NY Attorney General, are owned and run by the same group of executives and staff.
Tether is a so-called "stablecoin" and the company claims that every Tether virtual coin is backed by a dollar held in reserves, the idea being that people can be assured of its stability. But last month, on March 4, the NY Attorney General notes that Tether changed that assurance to note that "every Tether is always 100 per cent backed by our reserves, which include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties." [...] As part of that investigation, the OAG uncovered documents that purportedly show that in mid-2018 Bitfinex didn't have sufficient real-world currency deposits to meet customer demand.