Justice Joel M. Cohen of the New York Supreme Court (NYSC) has ruled to extend the preliminary injunction in the ongoing case of crypto exchange Bitfinex and Tether’s parent company, iFinex, against the New York Attorney General (NYAG), on July 29.
Cohen reportedly decided to give a 90 day extension to the case, which apparently means that OAG can continue investigating. Lawyers of Tether tried to appeal to dismiss the motion immediately, but Cohen rejected their appeal.
Speaking before the court, iFinex also argued that the court does not have subject matter jurisdiction because Tether is not a security or commodity as there is no futures market. The companies’ defense also stressed that Tether and Bitfinex are two different companies with two different business models, and that it is not proper to treat them as a single entity as the OAG does.
How it all began
Back in April, NYAG Letitia James revealed that her office obtained a court filing alleging that iFinex Inc. and their associated entities were in violation of New York law in connection with activities that may have defrauded New York-based crypto investors.
Bitfinex allegedly lost $850 million in client and corporate funds, and then attempted to cover up this loss by secretly helping itself to around $900 million of Tether’s cash reserves. iFinex subsequently responded that the OAG’s claims were “riddled with false assertions” and that the lost $850 million is being safeguarded.
iFinex further applied to have the case dismissed, arguing that the OAG has no legal basis to sue it for the simple reason that Bitfinex wasn’t operating in New York during the period at issue. In early July, news broke that New York-based Metropolitan Commercial Bank closed of a New York-based bank account, indicating that Tether and Bitfinex may very well have been operating in the state of New York.
Following the news, lawyers for Bitfinex and Tether submitted multiple fillings on July 22 alleging that the companies never served customers within New York. The lawyers argued that even if the NYAG were successful in showing that the companies served New York residents, they have not established that the investors were affected by the companies’ activities. The parties’ representatives stated:
“For purposes of personal jurisdiction, OAG cannot show Respondents engaged in any business activity purposefully directed at New York. OAG tries to confuse matters by referring to isolated instances where Respondents’ foreign customers have shareholders or other personnel in New York. But in those circumstances, Respondents’ counterparties — the ones with which Respondents actually transacted business — are the foreign entities.”