The price of bitcoin plunged Thursday following an announcement from the New York Attorney General’s office that it had filed a lawsuit against Bitfinex Inc., the company behind cryptocurrency exchange Bitfinex and the Tether stablecoin.

The lawsuit claims that Bitfinex and Tether engaged in “undisclosed, conflicted transactions to cover Bitfinex’s losses by transferring money out of Tether reserve funds.” The amount claimed to have been taken is at least $700 million, with Bitfinex trying to cover a loss of $850 million.

The alleged fraud comes via a relationship Bitfinex established with Crypto Capital Corp., a Panama-based payment processing firm which saw the company commingle client funds with its own capital.

Crypto Capital Corp. is alleged to have stolen $850 million, so Bitfinex then used Tether reserves to cover the lost funds without ever disclosing the theft publicly.

Crypto Capital Corp. is also said to have provided services to other cryptocurrency firms, including QuadrigaCX, a Canadian cryptocurrency exchange that shut down in February with $190 million stolen in a suspected exit scam.

“Our investigation has determined that the operators of the ‘Bitfinex’ trading platform, who also control the ‘tether’ virtual currency, have engaged in a cover-up to hide the apparent loss of $850 million dollars of co-mingled client and corporate funds,” New York Attorney General Letitia James said in a statement.

This isn’t the first time Bitfinex and Tether have gained attention from various levels of government. The U.S. Commodity Futures Trading Commission launched an investigation into whether Tether was properly funded in January 2018. And in November the U.S. Department of Justice also launched its own investigation into Tether.

Although it’s no longer a leading cryptocurrency exchange via volume, at 30th in the world according to Coinmarketcap, Bitfinex through Tether remains highly influential in the bitcoin market, and Tether is the most popular stablecoin on the market. So if Bitfinex is in trouble, so too could be a significant portion of the cryptocurrency market.

After a strong run, bitcoin plunged 4.84%, to $5,173.20 as of 10:20 p.m. EDT, its lowest level since April 16.

Image: 149561324@N03/Flickr