Bitcoin Price Crashes Following Controversy over Bitfinex and Tether

• Crypto markets have seen a sharp decline over the past 24 hours with almost all of top 100 coins listed on CoinMarketcap in the red.
• The decline in crypto markets coincided with the recent decision by the New York Attorney General to take legal action against Bitfinex’s parent company for alleged fraud.

Bitcoin fell 4% on Thursday on news that the New York Attorney General (NYAG), Letitia James, sued the company behind the crypto exchange Bitfinex. James alleged that the exchange’s parent company, which also owns stablecoin Tether, has commingled business and customer funds to hide illegal behavior. As per his investigations, the company had been using Tether to mask an $850 million worth of missing funds that had been stolen by nefarious profiteers sometime last year.

According to the legal filing, Bitfinex used the controversial USD-backed cryptocurrency tether (USDT) – to pay out clients demanding withdrawals from the exchange.

“Our investigation has determined that the operators of the ‘Bitfinex’ trading platform, who also control the ‘tether’ virtual currency, have engaged in a cover-up to hide the apparent loss of 850 million dollars of the co-mingled client and corporate funds,” New York Attorney General Letitia James said in a statement.

Following this revelation, crypto markets shed about $10 billion of its value. Bitcoin, the world’s largest cryptocurrency by market cap, has faced downward pressure after enjoying an epic rally in April as investors fear the impact of the lawsuit filed against Tether’s parent company by NYAG.

A $5,005 bitcoin purchased on Thursday reflects a 4.3% drop from its price 24 hours before yesterday. Altcoins like Ethereum also plunged by 5 to 10%. Somehow, USDT, which is at the center of the investigation, is trading around $0.99 after briefly dipping below $.98. The price of Tether has to remain at $1 as it is the most widely used stablecoin. Anything below that is likely to lead to crypto market instability.