Law firms representing the two companies argue that the New York Supreme Court (NYSC) does not have jurisdiction over the alleged misconduct being considered.
The lawyers argue that the NYSC has neither personal nor subject matter jurisdiction and that the NYSC cannot be appealed to, because Bitfinex and Tether are neither operated out of New York nor harmed investors in that state. As per the motion:
“The Office of the New York Attorney General (“OAG”) initiated this special proceeding ostensibly ‘to protect New York investors.’ [...] But OAG chose to target two virtual currency businesses that have nothing to do with New York investors — the businesses do not allow New Yorkers on their platforms and do not advertise or otherwise do business here.”
The counsel further argues that the Martin Act — a law governing securities and commodities which the NYAG is using — does not apply to Tether’s stablecoin.
The case against Bitfinex and Tether was initiated via a court filing in April by NYAG Letitia James, who accused the two organizations of defrauding New York investors via a massive $850 million loss cover-up. Regarding the impetus to file, James said:
“New York state has led the way in requiring virtual currency businesses to operate according to the law. And we will continue to stand-up for investors and seek justice on their behalf when misled or cheated by any of these companies.”
As reported earlier today on Cointelegraph, a new development in the case has been revealed as the attorney for Bitfinex mentioned that Tether was invested in bitcoin (BTC) and other assets. New York Supreme Court Judge Joel M. Cohen responded with questions, saying:
“Tether sounded to me like sort of the calm in the storm of cryptocurrency trading. And so if Tether is backed by bitcoin, how is that consistent? If some of your assets are in a volatile currency that Tether is supposed to somehow modulate, that seems like it’s playing into what they are saying.”