Bitfinex and Tether have agreed to stop all trading activity in the state of New York as part of a settlement announced today by New York Attorney General Letitia James. The two firms also agreed to pay $18.5 million in fines to end the state’s 22-month investigation into their activities.

“Bitfinex and Tether recklessly and unlawfully covered-up massive financial losses to keep their scheme going and protect their bottom lines,” said Attorney General James. “Tether’s claims that its virtual currency was fully backed by U.S. dollars at all times was a lie. These companies obscured the true risk investors faced and were operated by unlicensed and unregulated individuals and entities dealing in the darkest corners of the financial system."

According to the statement, the two firms made false statements about the backing of Tether and the movement of hundreds of millions of dollars between the company—to cover up losses when its shadow bank Crypto Capital had its funds confiscated by police.

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The statement referenced the OAG investigation, which it says found that from mid-2017, Tether had no access to the banking system and did not have reserves to back the Tether in circulation at the time.

As a result, Bitfinex and Tether will no longer be allowed to have any trading activity with citizens of New York. The companies will also need to provide regular reports on business functions, providing clear details on their funds held as reserves. Tether must provide public disclosures of the assets backing Tether, separated by categories, including any loans to or from affiliated entities.

Tether responds to the NYAG

In a statement, Tether said it has not admitted any wrongdoing under the terms of the settlement.

"The Attorney General’s Office concluded, in essence, that we could have done better in publicly disclosing these events. Contrary to online speculation, after two and half years there was no finding that Tether ever issued tethers without backing, or to manipulate crypto prices," Tether said.

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Tether acknowledged that it did make the loan highlighted by the NYAG, but said it has since been repaid in full. Tether said that the loan did not prevent the firm from issuing redemptions at any time.

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