Bank asks Tether to close its accounts

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Tether’s questionable relationship with Bitfinex, and the ongoing drama between the two and the New York Attorney General’s Office (NYAGO), has caused additional fallout. Metropolitan Commercial Bank, a financial institution based in New York, has contacted Tether and requested that it close its accounts at the bank. The decision follows a revelation by the NYAGO in court that Tether held accounts at both Metropolitan and Signature Bank.

CoinDesk was able to speak with someone at Metropolitan, who said in an email, “Metropolitan Commercial Bank had limited, corporate operating accounts with Tether Holdings LTD, iFinex Inc, and Digfinex Inc, all with negligible activity, and requested the accounts to be closed after less than 5 months of the accounts being opened.”

In a statement to CoinGeek, a representative for Metropolitan Commercial Bank clarified that the bank had already taken “the initiative to request the close of Tether’s account back in early 2018.” 

CoinDesk reportedly tried to get a response from Signature, but was only told that the bank doesn’t comment on customer-related issues.

New York Attorney General (AG) Letitia James is going after Tether and Bitfinex, accusing them of defrauding New Yorkers as they attempted to cover up losses amounting to $850 million. James has filed supporting documentation that shows activity of the two entities that is, according to the AG, suspect as the case continues to be heard by a New York court judge.

It has been shown that Tether provided the money to Bitfinex after the latter suddenly found itself short when its payment processor, Panama-based Crypto Capital, had funds seized. The seizure was not reported by Bitfinex and neither company reported the loan agreements.

Among other issues that have the AG concerned are the fact that Tether and Bitfinex have reportedly issued unsecured loans to investors and the assertion by Tether that each digital token is backed by one U.S. dollar. That was the initial position of the company; however, now asserts that the tokens are backed by a mix of fiat, fiat-backed investments and some crypto investments.

According to Tether’s own admission, only around 75% of the tokens are now backed by dollars. It has been revealed that the company has used the fiat reserves to make investments and loans, which is in complete violation of securities rules in the U.S.

Tether and Bitfinex have tried to have the AG’s lawsuit thrown out, alleging that the state doesn’t have jurisdiction to prosecute since the two entities don’t operate in New York. However, James produced documents this week proving that to not be the case, and that the two companies are alive and well in New York. She also showed that Tether and Bitfinex had helped certain New York investors form offshore shell companies and that Bitfinex had entered into a loan agreement to issue Tethers to a trading firm in the state.

Editor’s note: This article has been updated to add the statement from Metropolitan Commercial Bank.