UPDATE (May 1, 2019, 1:40 AM UTC): Later on Tuesday, New York Supreme Court Justice Joel Cohen ordered NYAG’s office to demonstrate to the court why the Attorney General’s original ex-party order should not be immediately canceled, or at least amended, to allow Bitfinex employees and Tether can access a line of credit offered by Bind to Bitfinex. NYAG must submit a response by May 6, 2019 detailing its rationale.
As of April 30, the USDT stablecoin is only 74 percent covered by fiat equivalents, says the issuer’s general counsel.
Tether, the company behind USDT, holds approximately $ 2.1 billion in cash and short-term securities, its general counsel Stuart Hoegner wrote in an affidavit on Tuesday. Hoegner is also General Counsel of Bitfinex, a crypto exchange that shares executives and has overlapping ownership with Tether.
The two companies are at the center of allegations by the New York Attorney General, who says Bitfinex borrowed more than $ 600 million from Tether after losing up to $ 850 million to a currency converter.
Hoegner filed the affidavit to support an order to display the reason to vacate or change NYAG’s ex parte order filed last week and to maintain the order that would force Bitfinex and Tether to hold certain documents up to be submitted by May 3rd.
Indeed, under the headline “Retaining Belt Holders Are Not At Risk”, Hoegner confirmed that USDT is no longer 100 percent funded by cash or cash, and said:
“From this date [April 30] I sign this affidavit. Tether has cash (short-term securities) of approximately $ 2.1 billion, approximately 74 percent of Tethers currently outstanding. “
According to Omni Explorer, a block explorer for Tether, approximately 2.8 billion USDT tokens are being issued at press time.
Not fully secured
Another attorney representing Tether, Zoe Phillips of the Morgan Lewis Law Firm, wrote in a memorandum of law in support of the defendants’ order that Tether is not required to hold $ 1 for every USDT spent.
She wrote:
“According to the Attorney General, the line of credit had to be frozen as it did not properly affect the reserves that Tether would use for withdrawals. The attorney general appears to believe that for every dollar Tether has, Tether must hold $ 1 in cash. These claims are false on several levels. “
The terms of the Tether and Bitfinex loan agreement were “negotiated on market terms on economically reasonable terms,” she added, saying that each of the companies was represented by an independent attorney.
As Bitfinex critic Bitfinex noted on Twitter, the same person – Giancarlo Devasini – signed both the Tether and Bitfinex agreements.
Hoegner reiterated Phillips’ claim that the agreements were independently negotiated, adding that Tether had noted on its website that its stablecoin was no longer 100 percent supported, citing media reports when the platform changed its stance.
Market protection
Hoegner wrote in his affidavit that the Bitfinex and Tether loan agreements were “signed to protect the virtual currency market,” which may underscore concerns that the two companies are an essential part of the crypto market infrastructure.
“Tether and the owners of Tether have a keen interest in ensuring that one of the dominant trading platforms for Tether has sufficient liquidity to operate normally,” he wrote, discussing the potential benefits of the deal.
He added that any disruption to Bitfinex’s operations could harm Tether as well.
An average of $ 566,066 was repaid between December 2018 and April 29, 2019, Phillips added, with the largest repayment over that period being $ 24.2 million.
Hoegner did not immediately respond to a request for comment.
Read Hoegner’s full affidavit:
Stuart Hoegner Affidavit 4-30 from CoinDesk on Scribd
Image of the New York Supreme Courthouse via Wikimedia Commons / wallyg
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