Per the document dated May 16, David Miller, an attorney for Tether’s associated firm Bitfinex, said that Tether invested “a small amount” of Tether’s reserves into bitcoin, specifying that “prior to the April 24th order … Tether actually did invest in instruments beyond cash and cash equivalents, including bitcoin, they bought bitcoin.” Miller further said that Tether made “other investments, including purchasing other assets.”
In response to Miller’s statement, New York Supreme Court Judge Joel M. Cohen doubted the logic of investing a stablecoin in a volatile asset like bitcoin:
“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.”
As previously reported, the New York Attorney General’s (NYAG) office alleged that crypto exchange Bitfinex lost $850 million and subsequently used funds from Tether to secretly cover the shortfall. Lawyers from Tether confirmed preexisting rumors that its tokens did not have full reserve backing, and was in fact only 74% backed by fiat dollars and other reserves.
NYAG Letitia James further requested the disclosure of documents concerning an alleged deal made between the two companies.
Following the request, the New York Supreme Court judge Joel M. Cohen decided the parties should try to resolve their dispute and submit a refined argument, claiming that the NYAG cannot bring the full force of its court order against Bitfinex and Tether. Both companies denied any wrongdoing, heavily criticizing New York authorities for the manner in which they raised their complaint.