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Troubled crypto exchange Bitfinex has confirmed it has repaid $100 million of the money it borrowed from sister company Tether, in the aftermath of legal action against the company brought by the New York Attorney General (NYAG).

Parent company iFinex Inc., which controls both Bitfinex and Tether, confirmed the exchange had begun repaying its liabilities after a line of credit was opened to allow Bitfinex to access Tether reserves.

The facility saw Bitfinex draw as much as $700 million from Tether reserves to fill a black hole in its finances, after it emerged the exchange had lost some $850 million after Panama-based payment processor Crypto Capital had its funds seized in three separate jurisdictions over suspected irregularities.

The NYAG has alleged that the commingling of funds between the firms amounts to a breach of faith with Tether users, who have repeatedly been assured that the stablecoin is backed by US dollar reserves.

While the legal action is still ongoing, iFinex is petitioning the courts to dismiss the action, on the grounds that there is insufficient evidence, and that the New York Attorney General lacks the jurisdiction and authority to raise this type of action.

In an announcement addressing the repayment, the firm said it intends to repay all monies borrowed from Tether.

“Bitfinex made this payment in fiat wired to Tether’s bank account. This amount was not yet due to be paid to Tether under the facility, but Bitfinex has made the prepayment based upon its financial position at the end of the second quarter of 2019,” the exchange stated. “Also on July 1st, Bitfinex fully prepaid all interest accrued under the loan facility to Tether up to the end of day on June 30, 2019, also in fiat.”

Nevertheless, the decision to draw on funds from a separate entity has led to vocal criticism of the firm, which continues to assure Tether users that the currency is backed by fiat reserves.

With $600 million still outstanding, it remains to be seen how quickly Bitfinex can return the money borrowed from Tether’s reserves. 

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