CoinDesk has joined the litigation between the New York Attorney General’s Office (NYAG), Tether and its parent company as part of the news organization’s efforts to shed light on the reserves providing $ 78.4 billion in stablecoins.
In August, Tether, along with iFinex, which owns Tether and cryptocurrency exchange Bitfinex, petitioned the New York State Supreme Court to bar NYAG from providing CoinDesk with documents detailing the reserves. CoinDesk is now a party to this case, as it is interested in its outcome – the publication also claims that the investment community is interested in this.
“The public interest in disclosing the requested information greatly outweighs any private interest for Tether,” CoinDesk’s memorandum filed with the court on January 4 said.
Neither Tether nor NYAG objected to CoinDesk joining the case, according to a December 20 statement signed by lawyers from all three parties. The Intervention Order, signed by Judge Lawrence L. Love, was released two days later.
In June 2021, CoinDesk filed a Freedom of Information (FOIL) request with NYAG to provide documents from the office’s investigation of Tether and Bitfinex, which had the companies negotiated a $ 18.5 million deal earlier that year. …
The FOIL request also asks for a copy of Tether’s statement to NYAG in May 2021, when the stablecoin issuer first posted a breakdown of its holdings.
It was identical to the one that Tether sent to the NYAG office in accordance with the February agreement, Stuart Hoogner, general counsel for Tether, said at the time.
The NYAG officer in charge of FOIL initially denied CoinDesk’s FOIL request. The news organization appealed and the appeals inspector overturned the decision. In its petition, Tether argued that the exact composition of its reserves is a competitive trade secret and that disclosing that information would hurt its business.
Assistant Attorney General James B. Cooney filed a petition to reject Tether’s petition on December 6.
Public interest or trade secret?
Basically, CoinDesk has argued in court filings that it is in the public interest to disclose what exactly underlies the USDT stablecoin issued by Tether and therefore should not qualify as a trade secret. Tether itself claimed that it made the decision to disclose its reserves in advance when it announced a settlement with NYAG.
The documents were signed by the news organization’s chief content manager Michael Casey and submitted to court by Lacey H. Koons III and Olivia Hayes Franklin, attorneys for Klaris Law PLLC. They argued that “the requested information does not fall under any of the FOIL exceptions.”
CoinDesk’s lawyers have presented an expert opinion explaining why the Tether documents should be made public.
“In my opinion, the disclosure of USDT reserve assets will enable users and the public to properly assess Tether’s claims for market stability and performance,” wrote Robleh Ali, CEO of Wadagso Inc., a technology company specializing in digital currencies and related market infrastructure.
“Tether’s statement of a secret investment strategy that cannot be disclosed to users does not match USDT’s purported status as a stable asset that keeps the market going and is more suitable for a hedge fund. USDT can be either an exotic investment with a secret investment strategy or a stablecoin – it cannot be either one or the other, “added Robleh Ali.
CEO of Wadagso Inc. criticized Tether’s comparison to Ray Dalio’s hedge fund, Bridgewater Associates, in previous court filings.
“There is a fundamental difference between the two,” he wrote. Bridgewater “positions itself as an investment company created to generate returns for its investors, not as a stable asset to facilitate trading elsewhere.”
(In addition, Bridgewater lists some of its public shareholdings and their values in filings with the Securities and Exchange Commission.)
An affidavit was also presented, signed by the site’s executive editor Mark Hochstein, in support of CoinDesk’s response to Tether’s petition.
Hochstein noted that New York Attorney General Laetitia James said in a press release announcing the settlement that “Bitfinex and Tether have recklessly and illegally concealed huge financial losses to preserve their scheme and protect their own profits” and ” that its virtual currency was always fully backed by US dollars was a lie. “
Tether has until February 4th to respond to CoinDesk’s arguments. The court plans to hear the arguments of the parties on February 7.
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