The crypto exchange Bitfinex and the stablecoin operator Tether have asked a New York court to force the attorney general to reject a request for information from the crypto industry publication CoinDesk.
Under New York’s Freedom of Information Act, members of the public can file requests for access to government documents, such as court documents or records of lawmakers and their work.
CoinDesk has filed a Freedom of Information Act or FOIL motion for documents detailing the breakdown of Tether’s reserves. Bitfinex and Tether presented this information to NYAG this May as part of their settlement agreement with the agency – an arrangement that ended a month-long litigation between the two over whether parent company iFinex mixed up funds and misrepresented the reserve support of USDT.
According to CoinDesk, Tether’s attorneys first asked the NYAG FOIL officer to deny the request and they complied. CoinDesk then appealed that decision and saw success when FOIL appellants granted Kathryn Sheingold access to the documents.
Tether is now trying to block access to the documents on the grounds that disclosure of the requested information would jeopardize its competitive advantage.
The block had made similar requests for information and has since been informed by a FOIL officer that the requests were made under a law that allows an authority “to deny access to records or parts thereof that are trade secrets or are being filed” by Disclosure may be passed on by a trading company to an agency or derived from information provided by a trading company, the disclosure of which would significantly impair the competitive position of the company concerned. ‘”
The argument is that a detailed description of who the company works with to make money and what methods it uses in those relationships is tantamount to disclosing “trade secrets”. The FOIL process enables authorities to reject records that would compromise “trade secrets”.
In its petition, Tether claims that providing the requested information would jeopardize its investment strategy, which other companies could use to bridge the competitive gap between them and Tether:
“The same goes for Tether’s internal investment strategy … The full details of the investment strategy Tether uses to achieve its returns and the counterparties and issuers it works with to achieve them are an important part of its business and one that that it does. ” do not want to reveal to the general public. The competitive advantages that Tether gains from its investment strategy would be undermined if competitors had full visibility into Tether’s investments. “
The company also claims that the information in the documents would affect its relationship with partners who are critical to the aspects of its business that attract customers:
“Bitfinex and Tether have spent years cultivating non-public relationships with financial institutions around the world that are capable of efficiently processing high volumes of high-quality transactions … This great customer experience is central to success Bitfinex and Tether in the market – but could easily be replicated by competitors if the companies’ financial network were publicly disclosed. “
However, CoinDesk says that in its request it specifically only asked for information that Tether has already committed to publish. Tether released a breakdown of its reserves earlier this year. The CoinDesk request made it clear that the release is not interested in any other documents related to the reserves, only the breakdown sent to NYAG in May. The source of the additional information requests is currently unknown.
“I’m specifically just looking for information about what supports Tether’s reserves, including the document that Tether allegedly sent to OAG in May 2021,” the request said, as CoinDesk reported on Tuesday. “I currently do not need any further documents regarding the investigation or the ongoing monitoring of the tether reserves by the OAG for the next two years.”
In his petition, Tether argued that this information is already available to the public in a form that does not detract from the company’s competitive advantage. In addition, by publishing documents related to the comparison, malicious actors would have access to compliance information that could enable them to drill holes in the company’s compliance system.
In a statement to The Block, Tether said, “In any other industry, this type of proprietary, competitive-sensitive information would be clear and strong, and the same should apply to us and any other company in the crypto ecosystem, we vigorously reject the notion that copyright is proprietary information of our company or any other company in our community should be published only to please internet trolls or other critics. “
The documents will remain private for fifteen days after a judge ruled whether Tether should be exempted from FOIL requests, according to a New York FOIL official.
“We were disappointed, but not surprised, to see that Tether had initiated proceedings to block the release of documents requested by CoinDesk under the Freedom of Information Act motion after the Attorney General’s Office agreed with CoinDesk to release those documents “Lance Koonce of Klaris Law, who represents CoinDesk, said in a statement:” We look forward to the OAG’s decision being upheld in court. “
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