Judge Asks NYAG to Narrow Scope of 'Amorphous' Bitfinex Document Request

A New York judge has ordered crypto exchange Bitfinex to turn over documents pertaining to the exchange's alleged cover-up of an $850 million loss and a subsequent loan from stablecoin issuer Tether - but not immediately.

New York Supreme Court judge Joel M. Cohen said during a Monday afternoon hearing that the preliminary injunction secured by the New York Attorney General's office at the end of April should remain in effect, at least in part, though he took issue with the scope.

Attorneys for both plaintiff NYAG and respondents Bitfinex and Tether have a week to hammer out either a joint or individual proposals for what the scope of the injunction should be, which the judge will rule on.

While he denied the motion with respect to vacating, staying or modifying the order in terms of discovery and denied the motion with respect to vacating or staying the injunction in its entirety, he granted the motion to modify the "Substantive and temporal scope of the injunction."

The injunction in question was filed on April 25, when the NYAG's office revealed that the exchange had borrowed nearly $1 billion from Tether's reserves after losing access to $850 million held by a payment processor, Crypto Capital.

Under the terms of the injunction, Bitfinex and Tether were compelled to turn over all documents about these funding maneuvers, as well as immediately cease any further borrowing.

Attorneys for Bitfinex and Tether filed to either vacate or modify the preliminary injunction last week, saying that Bitfinex not being able to access Tether's funds is harmful to both the exchange and to the broader crypto market.

For their part, NYAG attorneys said that the injunction is "Narrow," and would not have a significant impact on either Bitfinex or Tether's operations.

Under the Martin Act, the NYAG's office can regulate securities and commodities, or the venues where securities and commodities are traded, said David Miller, an attorney for Bitfinex.

Speaking more broadly to Bitfinex and Tether's response to the NYAG, Cohen took a minute to acknowledge Tether's note that banks do not typically hold 100 percent of the funds their customers claim, saying, "I recognize the point that banks don't have all of the dollars available at a moment's notice. I also recognize that you're not banks, you're not heavily regulated."