iFinex Inc., the parent company of cryptocurrency exchange Bitfinex and the Tether stablecoin, has settled a long-running lawsuit filed by the New York Attorney General’s office in April 2019.

The lawsuit claimed 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 was claimed to have come via a relationship Bitfinex established with Crypto Capital Corp., a Panama-based payment processing firm that commingled client funds with its own capital.

Under the terms of the settlement, iFinex has agreed to pay a fine of $18.5 million in return for admitting no wrongdoing. In addition, the company agreed to provide quarterly reports describing the composition of Tether’s reserves for the next two years, along with agreeing to end all trading activity with those living in New York. Should it comply, the New York Attorney General has committed to bringing no charges against the company.

“Bitfinex and Tether recklessly and unlawfully covered-up massive financial losses to keep their scheme going and protect their bottom lines,” New York Attorney General Letitia James said in a statement. “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.”

The drama surrounding Tether, a cryptocurrency that’s used to purchase other cryptocurrencies, most regularly bitcoin predates the legal case. Allegations that iFinex was not holding reserves to back Tether – a stablecoin is meant at least in theory to be backed by real assets to support its price — first emerged in January 2018 and the U.S. Commodity Futures Trading Commission reported to have launched an investigation. A report later the same year claimed that the U.S. Department of Justice had also launched a criminal probe into the stablecoin.

In December 2018 it was revealed that bank statements showed iFinex was holding adequate U.S. dollar reserves to back Tether, but then the company itself then admitted in April 2019 that it had dipped into Tether reserve funds to cover an $850 million loss, which then resulted in the lawsuit by New York State.

Despite tumultuous times in the cryptocurrency market, Tether, also known as USDT, was as of 9:30 p.m. EST trading where it should be: exactly $1.

Image: 30478819@N08/Flickr