UPDATE: This was refiled presumably as part of the formal movement from the Supreme Court back to trial and the actual decision came down in July. Thank you to Rob Stevens for reminding me of this fact.
There was finally a new development in the long delayed Digfinex/iFinex/Bitfinex/Tether NYAG case. The New York State Supreme Court heard the appeal from Bitfinex and unanimously decided to send them back to trial, dismissed their motion to dismiss, and reaffirmed that they need to supply the ordered documents.
I will review the document below.
The judges lay out initially that this appeal was absolutely meaningless from the start, and nonetheless take the time to lay out why each of Bitfinex’s arguments are invalid.
They begin (as shall I) with Tether’s argument that it is neither a security or a commodity and as such these activities surrounding Tether are not covered under the Martin Act. The judge strongly disagrees.
The first point laid out here is explaining that Bitfinex did not appeal correctly to challenge the NYAG jurisdiction, and instead in effect were trying to appeal the right of the Supreme Court to hear an application for this type of order.
The second point follows along with this one to emphasize that they did not appeal the order they appear to have a problem with.
The third point, is laying out even if they had handled this appeal correctly Tether would still be found to be covered under the Martin Act.
After settling the issue of whether Tether was neither a commodity a security they addressed the argument by Bitfinex that the New York Supreme Court lacked personal jurisdiction. In this argument Bitfinex tried to claim that there was insufficient link between their activity in New York and the alleged fraud. The judge did not find this argument convincing at all.
The first point that the judge emphasizes is that a single transaction is sufficient for their to be jurisdiction. They further affirm that since the investigation now centers around a fraud perpetrated by deceit about backing that it would affect the New York traders/Tether holders.
The judge then conveniently reviews for us some of the many ways that Bitfinex/Tether are tied to New York. Namely: they had traders in New York, they had traders in New York even after allegedly banning traders from New York, they had an executive working in New York (Phil Potter), the New York based executive they had specifically collaborated with other businesses who were based in New York, and finally that they hired multiple other firms in New York.
Even after thoroughly pointing out that Tether was deeply linked to New York, the judge elected to continue and point out that generally as long as there is sufficient evidence of some connection they will allow for an order like discovery to go forward in order to determine the extent to which a connection exists.
The final argument that Bitfinex has trotted out several times is that they were not served properly. The judge clearly points out that this is a ridiculous claim, and that Bitfinex’s counsel who had been working with the New York Attorney General during the investigation was served by hand, email, and overnight delivery.
In conclusion, this case has been moved from the appellate court back to trial, Bitfinex and Tether must hand over the documents requested, and they are now in an extraordinarily difficult position.
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