Bitfinex Wins Stay from NY Supreme Court: Jurisdiction Under Scrutiny


Today tech media is reporting that Bitfinex and Tether have won a stay of demands from New York Supreme Court Justice Joel Cohen in the curious case of Bitfinex v. NY Attorney General’s office.

Loyal readers will be aware that the NYAG office is pursuing Bitfinex over claims that it used $850 million of Tether-related stablecoin funds to cover a shortfall, a claim brought last April against the exchange.

Looking at the court ruling on the exchange’s application brought this week, it’s clear that the court is providing a more precise focus on the central question in this case which is: does Bitfinex operate in New York?

The New York State AG office has publicly claimed that Bitfinex continues to work with New York investors, and argues that it’s case of exchange fraud relates to New York parties. Bitfinex spokespersons have publicly said that they do not any longer operate in New York at all, and that they do not serve New York investors.

“In yesterday’s motion, law firms representing the two companies specifically argued that the New York Attorney General (NYAG) has neither personal nor subject matter jurisdiction and that the NYSC cannot be appealed to, because Bitfinex and Tether are neither operated out of New York nor harmed investors in that state,” reports Ana Alexandre this morning at Cointelegraph.

Bitfinex lawyers are doubling down on this contention in court filings Tuesda,  claiming that the AG’s attempts to characterize Bitfinex as operating in New York are erroneous.

“(Bitfinex and Tether) have nothing to do with New York investors — the businesses do not allow New Yorkers on their platforms and do not advertise or otherwise do business here,” attorneys Jason Weinstein and David I. Miller wrote according to reporting by Marc Hochstein at Coindesk.

Another interesting detail coming out of that filing shows that the AG’s office is using the Martin Act, a law that has been called the most draconian securities fraud law on the books in the US, and for which the New York legislature has enacted specific limitations.

“Whether you work on Manhattan’s Wall Street or in a smaller shop in Brooklyn, White Plains or any other municipality, if the New York State Attorney General, the Manhattan District Attorney’s Office or any other local prosecutor’s office accuses you of a Martin Act violation, be prepared for law enforcement to come after you with their guns blazing,” write staff members at NY criminal law office Crotty Saland PC.  “Potentially armed with subpoenas and search warrants, the Martin Act is a powerful weapon in the arsenal of a District Attorney or the Attorney General investigating securities and related financial frauds.”

With this week’s court activity, we have a lot more information about this case and more investigation into the truth of the matter – whether, as the exchange says, the court does not have jurisdiction because no New York parties are involved, or whether Bitfinex actually does still work with New York investors in some way. We’ll keep covering this case!