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New York Supreme Court Declares NYAG has Jurisdiction over Bitfinex

The New York State Supreme Court ruled that the New York Attorney General (NYAG) has jurisdiction over the case with cryptocurrency exchange Bitfinex, regarding fraud allegations.

The New York State Supreme Court ruled that the New York Attorney General (NYAG) has jurisdiction over the case with cryptocurrency exchange Bitfinex, regarding the fraud allegations.

IFinex, the company behind Bitfinex and Tether previously appealed to the court regarding fraud and taking funds from Tether to cover up an $850 million loss of funds resulting in the misled of information towards the investors in the state of New York. The NYAG argued that it was too early for the court to address jurisdictional questions during an ongoing investigation.

According to the court filing, the NYAG would be able to carry on with the investigation over the allegations of fraud and misleading investors.

The New York State Supreme Court denied IFinex’s motion to dismiss the NYAG’s lawsuit that would prosecute Bitfinex under the Martin Act. The court decided that it has jurisdiction to rule over the case.

The court has decided that the stay that was in place back in May 2019 has been eliminated. This means that relevant documents must be provided to the NYAG and Bitfinex has less than two months to turn over the documents.

New York State Watchdog Orders Two Crypto Firms to Close Operations, Launching Further Investigations

The Office of the New York Attorney General (NYAG) has directed two unnamed crypto lending firms to halt their operations in the state. At the same time, further investigations were launched into three additional platforms.

Requesting Crypto Firms to Obey the Law

Crypto lending platforms offer interest-bearing accounts. The regulator said that it has often advised entities that operate within the state or is offering related products to New Yorkers must register with the Office of the Attorney General (OAG). However, a directive that these two crypto lending firms seem to have neglected.

“Cryptocurrency platforms must follow the law, just like everyone else, which is why we are now directing two crypto companies to shut down and forcing three more to answer questions immediately,” said Attorney General James. “My office is responsible for ensuring industry players do not take advantage of unsuspecting investors. We’ve already taken action against a number of crypto platforms and coins that engaged in fraud or that illegally operated in New York. Today’s actions build on that work and send a message that we will not hesitate to take whatever actions are necessary against any company that thinks they are above the law.”

While the NYAG has often depended on New York’s Martin Act to define what assets falls under the classification of security, it noted that “the nature and function of the most common virtual currency lending products or services demonstrate that they fall squarely within any of several categories of ‘security’ under the Martin Act.”

Sanctions too Draining to Incur

The NYAG under Letitia James’s management has handled defaulters to its extant laws with iron hands, such that the sanctions issued are often too draining to incur. A move has pushed many emerging cryptocurrency platforms to secure the appropriate licenses before operating in the state.

The overall target of the Attorney General’s Office is to offer reliable investor protection, irrespective of the market involved.

NYAG Letitia James Warns Investors About Crypto Investment Risks

The collapse of the Terra protocol and its associated coins, LUNC and UST, as well as rhe ripple effect it had on the market, has pushed the New York Attorney General, Letitia James to issue new guidance on the risks inherent in the crypto industry.

As is customary of the legal luminary, the Attorney General said the risks inherent in the crypto industry played out last month when a number of old and new digital currencies lost the majority of their value.

While this sort of crash is not new in the financial world considering stocks are also plunging based on the impact of the broader macroeconomic events around today. To Letitia James, the plunge into the crypto ecosystem comes with an extra risk when compared to the broader stock that Americans are familiar with.

“Over and over again, investors are losing billions because of risky cryptocurrency investments,” said Attorney General James. “Even well-known virtual currencies from reputable trading platforms can still crash and investors can lose billions in the blink of an eye. Too often, cryptocurrency investments create more pain than gain for investors. I urge New Yorkers to be cautious before putting their hard-earned money in risky cryptocurrency investments that can yield more anxiety than fortune.”

Besides the risks of rug pulls, hacking, and theft amongst others, the Attorney General also highlighted the highly speculative and unpredictable value of cryptocurrencies, the difficulty in cashing out due to liquidity constraints on exchanges, high transaction costs, unstable stablecoins, limited oversight, hidden trading costs and conflicts of interest as some of the major risks associated with trading the digital currencies.

In a bid to protect investors in New York, Letitia James has brought quite a number of enforcement actions against crypto entities over the past few years with Bitfinex amongst the most publicized culprit.

US DOJ Revises Probe into Tether Regarding Bank Fraud – Report

The United States Department of Justice has reopened a probe into Tether Holdings according to a report from Bloomberg citing anonymous sources close to the probe.

Per the report, the probe is into allegations seeking to know if Tether violated any form of bank rules with respect to the movement of cash under false pretences.

The sources said the case has been transferred to the District Office in the Southern District of New York, where attornies like Damian Williams, renowned for investigating the highest profile cases in the digital currency ecosystem, operate from.

While Federal Prosecutors had informed Tether’s executives over a year ago that they may be probed in relation to some banking violations, the investigation report, if confirmed, will be the first proactive move to probe the regulators will be making in that regard in a while.

The transfer of the cases between DoJ Departments is an unusual move, showcasing the dynamics of the legal loopholes in the digital currency ecosystem that is still evolving. The current probe is centred on the partnership between Tether and Crypto Capital after the stablecoin issuer lost its banking relationships in the US, preventing its ability to access US to process its transactions.

One of Crypto Capital’s executives, Reginald Fowler, had already pleaded guilty to offences relating to false representations to obtain USD for its business activities. It is not clear whether the current investigation will involve Crypto Capital at this time.

Tether has issued a statement refuting claims that it is currently under investigation, saying that no officials have gotten in touch in more than a year.

“Tether executives have had no interactions with the DOJ in connection with any investigation for well over a year and the DOJ does not appear to be actively investigating Tether,” it wrote in the statement.

With Tether known to resolve some of its past probes through settlement with the New York Attorney General’s (NYAGs) office, the firm said it will continue to foster transparency in its product offerings.

New York AG wants retirement fund crypto ban

The upheaval that surrounded the cryptocurrency exchange FTX and Sam Bankman-Fried (SBF) confirmed the conviction of authorities that there is a need for stronger regulation throughout the whole cryptocurrency ecosystem.

Letitia James, the New York Attorney General (NYAG), proposed banning investments in cryptocurrencies like bitcoin and ethereum in defined contribution plans and individual retirement accounts in order to safeguard investors from experiencing a similar kind of loss (IRAs).

James wrote a letter to the members of Congress in the United States, requesting that legislation be enacted that would prohibit United States citizens from using funds from their individual retirement accounts (IRAs) and defined contribution plans (such as 401(k) and 457 plans) to purchase cryptocurrencies and other digital assets.

On the other hand, results of a study conducted in October 2022 indicated that almost half of investors headquartered in the United States want crypto to be included in their 401(k) retirement plans.

Further, James argued that the Retirement Savings Modernization Act and the Financial Freedom Act of 2022, both of which would legalize financial transactions involving digital assets, should be shot down. The Retirement Savings Modernization Act is a recent proposal, and the Financial Freedom Act of 2022 is set to take effect in 2022.

James scribbled down four key reasons supporting her request to remove digital assets from IRAs and defined contribution plans when she was outlining SBF’s role in conducting a Ponzi Scheme and misappropriating the monies of its members. These reasons will be detailed further below.

The New York Attorney General stressed, above all else, how vital it is to guard funds for retirement throughout the course of a lifetime.

Second, she brought attention to the historical responsibility that Congress has to safeguard the retirement savings of American people.

As her final justification for banning cryptocurrency investments, James cited storylines such as the prevalence of scams and the absence of adequate safeguards.

The custodial and value issues rounded out the list of things that caused anxiety, along with the volatility.

The New York Attorney General’s office, on the other hand, explained that there is a separation between blockchain technology and digital assets.

She is of the opinion that retirement funds ought to be able to be used for the acquisition of equity in publicly listed blockchain-based companies by citizens of the United States.