Even before the New York Attorney General revealed a bombshell lawsuit last week against Bitfinex and Tether, you probably had some concerns.
Suspicion has swirled around Bitfinex and Tether, which share the same owners and management, since at least early 2018, most of it focused on whether Tether, a stablecoin backed by the U.S. dollar, really holds a dollar in reserve for each coin.
The controversy intensified in the middle of last year after researchers from the University of Texas at Austin found that sales of Tether seemed to have been used to pump the price of Bitcoin during its run-up in 2017, suggesting that Bitfinex may have used the stablecoin to manipulate the market. (As a reminder, Tether has become an increasingly important player in the cryptocurrency markets, accounting for more Bitcoin trading volume than even the dollar.)
And yet, the problems detailed in the NYAG’s lawsuit go beyond what most people suspected. And they center around a…