A New York judge ruled Bitfinex must face the fraud suit and impending investigation set against it in April by New York attorney general Letitia James, denying the company’s request for the case to be dismissed due to lack of jurisdiction, Bloomberg reported.

Justice Joel M. Cohen said Monday that iFinex Inc., the Hong Kong-based parent company of Bitfinex and Tether, will be tried for James’s allegations that it used $900 million worth of Tether USDT reserves to fraudulently cover an $850 million loss of “co-mingled client and corporate funds”.

Per Cohen’s ruling, the Attorney General will also have access to information blocked by a temporary hold won in court by iFinex in May.

The verdict comes as a moment of resolution in a months-long legal clash between Bitfinex and the Office of the New York Attorney General (OAG), who since launching an injunction in April has pursued the company under New York’s Martin Act.

Under the act, the Attorney General is granted “broad powers”  to prosecute for securities and commodities laws violations in the famously stern jurisdiction of New York.

The OAG has endeavored through a series of attempts to prove Bitfinex has been operating on its turf, and in early July produced 28 pieces of evidence intended to prove the exchange served New York customers between 2017 and 2019.

Bitfinex has repeatedly challenged the authority of the OAG to prosecute on the supposed grounds it never served residents of New York, and in late July hit back with a legal filing stating that the only New York-based customers served by the exchange were trading through “foreign entities” and thus that the claims of the OAG were “misleading”.

The latest ruling confirms Bitfinex will face arguably one of the most imposing legal adversaries in finance, and yet the firm has said it is prepared to continue to defend itself in court.

According to a response to the ruling on the Bitfinex blog, the exchange maintains innocence on all counts, and has firmly dismissed the Attorney General’s claims as “meritless.”

“While we are disappointed in the decision on our motion to dismiss, we will continue to vigorously defend against any action by the New York Attorney General’s office. We look forward to the opportunity to pursue these issues further in the appellate court.”

…

“Any assertion that we have misled our customers about Tether (USDt), its backing, or about the negotiated transaction between Bitfinex and Tether is false. We remain committed, as ever, to protecting our customers, our business, and our community against the Attorney General’s meritless claims.”

Legal proceedings involving USDT, the largest USD-pegged stablecoin with a $4 billion market capitalization, could have catastrophic implications on the cryptocurrency markets. Further action against Bitfinex could also jeopardize the exchange’s native token, LEO, which the attorney general claimed could constitute an unregistered security.

The post Bitfinex must face New York attorney general in fraud lawsuit, says judge appeared first on CryptoSlate.

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