According to the official filing, New York Attorney General Letitia James came to an agreement with iFinex that will require them to cease any further trading activity with residents of New York state. The companies will also be forced to pay $18.5 million in penalties and add a number of changes to their operations that would increase transparency.
This includes providing quarterly reports assuring the NYAG that corporate and client accounts have been properly segregated, as well as providing reports about transfers of assets between all iFinex entities.
The investigation, restarted in 2020, found that since mid-2017, Tether frequently had no access to banking, which means the company held no reserves to back USDT. This, according to the filing, was contrary to what the company was representing.
In 2017 and 2018, the company produced a “self-proclaimed verification” of its cash reserves. At the same time, the company began to rely on third-party payment processors to handle customer deposits from Bitfinex, which resulted in around $850 million in customer funds being lost. The exchange then used funds from Tether to hide the loss. The companies were also found to have served customers in New York but were doing so as unlicensed and unregulated entities.