In brief

  • Bitfinex repaid a $100 million loan to Tether.
  • Tether issued Bitfinex a loan to cover funds that the exchange claims were stolen by Crypto Capital.
  • Both Bitfinex and Tether are under investigation by the New York Attorney General.

The beleaguered Hong Kong-based crypto exchange Bitfinex today announced that it has paid back another $100 million of its outstanding loan to its sister company, the stablecoin producer Tether. 

Tether funded Bitfinex to mint the exchange’s own “LEO” tokens, sold to users through an IEO in a bid to get the money back from funds it alleges were stolen by its former payments processor, Crypto Capital

“Bitfinex is pleased to announce that on Friday, February 28, 2020, it repaid $100,000,000 of the outstanding loan facility to Tether. Bitfinex made this payment in fiat wired to Tether's bank account. This payment is all on account of principal. Interest on all amounts due under the facility agreement has been prepaid up to March 2020,” the exchange said on its website. 

This is the second time Bitfinex has repaid the loan; Bitfinex repaid $100 million to Tether in July 2019. It was the initial “raiding” of Tether reserves by Bitfinex that sparked controversy within the crypto industry, and is central to the ongoing New York Attorney General’s investigation into parent company iFinex.

In a press release in April of last year, Attorney General Letitia James’ office argued that Bitfinex treated Tether’s cash reserves as its “corporate slush fund,” and that the reserves are “being used to hide Bitfinex’s massive, undisclosed losses and inability to handle customer withdrawals.”

Tether has since conceded that its stablecoin, USDT, was not fully backed by the US dollar, as originally promised, but only 74% backed. 

Nor does the NYAG agree with Tether and Bitfinex’s claims that they were robbed by Crypto Capital. “Step by step,” the attorney general wrote in a subsequent argument, the companies “dissipated the cash backing tethers: first by going from actual cash in hand to $625 million in an inaccessible Crypto Capital account; and then by replacing even that questionable source of backing with nothing more than a $625 million IOU from Bitfinex.”

In terms of the timing of the repayment, and when further payments can be expected, Bitfinex’s answers are unclear.

“Bitfinex management has made the assessment, based on Bitfinex's financial performance and circumstances, that it is in a position to repay principal on the loan early at this time,” a company spokesperson told Decrypt. “Further repayments of principal will be announced as and when they are made,” the company said.