The drama of the NY Attorney General and Bitfinex/ Tether drama has taken a turn as iFinex Inc., BFXNA, BFXWW Inc., and Tether Unlimited released a new document. The 30-page memorandum of law stated that the Attorney General “will not succeed” further questioning its basis on The Martin Act.
Under this, the respondents stated that the AG has still not succeeded in classifying whether Tether was a security or a commodity, highlighting that the Act covers “only transactions in ‘securities or commodities’, as defined in section three hundred and fifty-two”. The document reads,
“The New York General’s contemplated Martin Act action is unlikely to succeed based on a threshold fact that the tethers that were allegedly sold via fraud (i.e., the allegedly undisclosed transaction that depleted the tether reserves) fall entirely outside the statute’s reach.”
The respondents also stated that even under the Howey Test, Tether does not classify as a security because it is a stablecoin. Therefore, it would nullify one of its criteria, ‘an investment of money in a common enterprise with profits to come solely from the efforts of others’ as there would be no expected profits from stablecoins.
Additionally, the document also argued the Attorney General’s “claims it needed to take immediate action to protect New York investors”, pointing that they have failed to name a single investor. It further stated that the NY AG cannot prove the claim as “there are no ‘investors’ in tether”.
The document also revealed the exact amount of reserves Tether was backed by, stating that it was approx. to “74 percent of the outstanding amount of tether”. It stated,
“Further, the value of Tether’s reserves is more than sufficient to cover the outstanding tether in the market. In fact, Tether’s reserves of cash equivalents alone (without the line of credit) would cover approximately 74 percent of the outstanding amount of tether. This sort of ‘fractional’ reserving arrangements is similar to how commercial banks work.”