Bitfinex asserts NYAG made 'misleading' claims of jurisdiction in new case filings

Quick Take

  • Bitfinex filed an affidavit refuting claims from the New York Attorney General office, saying the NYAG stretches claims of New York jurisdiction
  • The two have been locked in a legal battle since April, when the NYAG brought a fraud suit against the exchange

The latest filings in the New York Attorney General’s suit against iFinex see the exchange fighting against the OAG’s claims of New York jurisdiction. The filings uploaded today claim the OAG misled the court in its July 7 filings, making New York connections seem stronger than they are.

In the filings, the OAG claims Bitfinex had operations in New York when it loaned Tethers to a New York based trading firm and opened up an account with another to facilitate the transaction. Bitfinex said this is misleading, and the borrower is in fact a foreign entity, and the New York trading firm was only utilized to complete the transaction.

In addition to this, Bitfinex claims the OAG made similar misleading claims in the so-called Whitehurst Affirmation, which contains a list of Eligible Contract Participants (ECP) showing New York logins from a professional trading firm using Bitfinex. The exchange claims each login is linked to a foreign ECP rather than New York-based companies.

“OAG tries to confuse matters by referring to isolated instances where Respondents’ foreign customers have shareholders or other personnel in New York,” read the filings.”But in those circumstances, Respondents’ counterparties — the ones with which Respondents actually transacted business — are the foreign entities.”

Bitfinex argued the customer is the entity itself, not the trader who works with the ECP. In this way, they said the OAG is making misleading statements as to who the customer is in each case cited in the July 7 filings.

“While certain ECPs have had shareholders or other personnel in New York, OAG cannot pierce the corporate veil and pretend that those individuals are Respondents’ customers,” said the filings. “They are not; the customer in each instance is the foreign ECP.”

On the point of Tether’s terms of service not reflecting a New York ban until 2018, Bitfinex argued that because Tether only served Bitfinex by 2017, it was subject to Bitfinex’s terms of service, which included a New York ban effective Jan. 30, 2017. 

The filings are an effort to bolster Bitfinex’s motion to dismiss due to lack of New York jurisdiction, a continued point of contention in the case. The 2017 filings saw the AG attempt to point out ties to the state, with today’s filings answering those allegations. Without jurisdiction, the exchange cannot be investigated under the state’s Martin Act, which empowers the NYAG in anti-fraud investigations.

“After broad jurisdictional discovery, OAG has not shown that any aspect of the Crypto Capital relationship or the loan transaction — the basis for the Order — touched on New York in any way,” said the Bitfinex filings. “OAG has failed to identify a single New York customer who was misled or even considered representations about tether’s backing, nor any New Yorker harmed.”

The case was first brought by the NYAG in April, when it alleged Bitfinex engaged in fraudulent activity in covering up an $850 million loss by co-mingling funds from its sister company Tether.

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