Bitcoin Price Falls

Bitcoin plunges after a major crypto exchange is accused of using client money to hide $850 million

Bitcoin plunged as much as 5% after a major cryptocurrency was accused of pulling $700 million from the reserves backing its digital coin to cover up $850 million in missing funds.

According to a lawsuit filed by the New York Attorney General, Hong Kong-based iFinex, which operates the Bitfinex exchange and popular cryptocurrency Tether, has been mixing client funds.

The attorney general’s office alleges that iFinex combined client funds with its own capital to hide the fact that cash went missing last year, which was never publicly disclosed.

Crypto markets lost as much as $10 billion late Thursday, CoinDesk found.

The attorney general’s office is working to expose “ongoing fraud being carried out by Bitfinex and Tether,” according to the lawsuit.

It accuses the pair of engaging in “undisclosed, conflicted transactions to cover Bitfinex’s losses by transferring money out of Tether reserve funds.”

Bitfinex transferred $850 million to Panama-based payment processor Crypto Capital to handle customer withdrawals last year, according to the lawsuit.

The company began having “extreme difficulty” fulfilling client withdrawal requests by the middle of 2018, as Crypto Capital refused to process requests and failed to return any funds to Bitfinex, the lawsuit states. To mask the shortfall, Bitfinex tapped Tether’s reserves to the tune of $700 million.

The attorney general’s office have obtained a court order instructing iFinex to cease transfers from Tether’s reserves to Bitfinex’s accounts, suspend dividends and other payouts to executives, and hand over documents, according to the lawsuit.

Bitfinex said the lawsuit’s claims were…

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