NYAG Can Continue iFinex/Bitfinex Investigation

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The New York Attorney General (NYAG) can continue its case against Bitfinex owner iFinex after the New York State Supreme Court decided yesterday that it has jurisdiction to rule over the case. iFinex had previously argued that the NYAG didn’t have jurisdiction over the exchange owner as it is a foreign entity with no customers or shareholders in the state, but the judge in the case, judge Joel Cohen, has denied this claim, allowing the case to continue from where it left off in May.

Judge Rules that iFinex Clients Were New York-based

iFinex’s attempt to argue that the case should not be tried in New York hinged upon the geographic location of the entity that received two loans, a $625 million transfer and a $900 million credit line, extended to Bitfinex by Tether. iFinex argued that the recipient was a foreign entity and not a New York-based company, but judge Cohen dismissed these claims:

…the Court finds based on the evidence and applicable law that it has jurisdiction – and a clear statutory mandate – to adjudicate this matter. Accordingly, Respondents’ motion is denied, and the temporary stay of the investigation is dissolved.

This decision allows the NYAG to not only continue its investigation but also demand that iFinex produce documents relating to the loans that they have so far withheld.

No Decision on Whether USDT Tokens are Securities

Another of iFinex’s chief arguments was that Tether’s USDT tokens can’t be considered securities and therefore can’t be governed by securities law. The filing discusses both sides of the argument, but those looking for a resolution on this long-standing matter will be disappointed, as no doubt were iFinex’s lawyers:

…rendering a verdict on tether at this stage is not only premature, it may also be superfluous…OAG (NYAG) maintains that its investigation concerns the operation of the Bitfinex trading venue as a whole, not just tethers… the Court rejects Respondents’ assertion that the proceeding should be dismissed based on an absence of subject matter jurisdiction.

The ruling on this particular aspect of the case may also disappoint Kik founder Ted Livingston, who may have been hopeful of a legal precedent when he goes toe to toe with the SEC over whether his KIN token sale was in fact a sale of unregistered securities. As far as iFinex goes, with their initial arguments dismissed and a legal demand to hand over documentation regarding the loans to Bitfinex pending, they will have to come up with another strategy to dig themselves out of a hole that is looking deeper and deeper by the day.