Cryptocurrency companies Tether and Bitfinex will be barred from doing business with New Yorkers, and will pay heavy fines, for false statements about Tether's backing and for covering up losses at Bitfinex, the state attorney general's office said Tuesday.
Attorney General Letitia James' office, which pursued legal action against the companies nearly two years ago, said the companies agreed to "end all trading activity with New Yorkers" and pay $18.5 million in fines.
Tether, a cryptocurrency intended to be backed at a 1:1 ratio by the U.S. dollar, wasn't fully backed by the dollar at multiple points in 2017 and 2018, James' office said.
"The OAG’s investigation found that, starting no later than mid-2017, Tether had no access to banking, anywhere in the world, and so for periods of time held no reserves to back tethers in circulation at the rate of one dollar for every tether, contrary to its representations," the office said in a statement.
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The AG's office also said that crypto exchange Bitfinex had suffered a "massive and undisclosed loss of funds" in 2018 and that it issued false statements to cover up the loss, masked in part by transfers from Tether.
The settlement agreement, which the parties signed last week, says Bitfinex still cannot guarantee that it will ever be able to recover the lost funds.