The Bitcoin price has begun dropping after a report about cryptocurrency exchange Bitfinex and its digital coin Tether (USDT).
Micky News has confirmed that Bitfinex allegedly used US dollars it held to back the coin to cover up US$850 million that went missing.
The finding was reportedly reached after an investigation by the New York Attorney General Letitia James.
“Our investigation has determined that the operators of the ‘Bitfinex’ trading platform, who also control the ‘tether’ virtual currency, have engaged in a cover-up to hide the apparent loss of $850 million dollars of co-mingled client and corporate funds,” said Attorney General James.
The Attorney General’s office has issued a court requiring that the operators of the companies immediately cease further dissipation of the U.S. dollar assets which back “tether” tokens.
The companies are also barred from destroying any documents and communications that could be relevant to the investigation.
“New York state has led the way in requiring virtual currency businesses to operate according to the law,” said Ms James.
“We will continue to stand-up for investors and seek justice on their behalf when misled or cheated by any of these companies.”
A press release from the Attorney General’s office says Bitfinex has already taken at least $700 million from Tether’s reserves.
“Those transactions – which also have not been disclosed to investors – treat Tether’s cash reserves as Bitfinex’s corporate slush fund, and are being used to hide Bitfinex’s massive, undisclosed losses and inability to handle customer withdrawals,” the release said.
The market has reacted immediately to the news, with the price of Bitcoin dropping five per cent within a matter of minutes.