iFinex, the entity known to be the parent company of Tether is back under the microscope as the legal proceedings against it take a new turn.
The firm is now under great pressure from the court as it needs to provide the proofs that the district judge has demanded.
The situation can end up bringing Tether under fire which may cause a huge problem for USDT, which is the stablecoin offered by the company.
Order Issued by the US District Court
The recent developments in the matter are from the case that was filed against iFinex back in 2019. A group of investors had filed a lawsuit against iFinex for its involvement in cryptocurrency market manipulation.
The case was going cold for a while but as the situation of the stablecoins started getting worse, it was time the court took an action against the largest stablecoin.
Therefore, New York’s Southern District Judge, Katherine Polk Failla issued an order for iFinex. The order is for iFinex, the parent company of Tether to provide financial records to prove the reserves that currently back USDT stablecoin.
The recent proceeding in the matter would impact Bitfinex as well because iFinex was the founding company behind the cryptocurrency exchange.
Claim by the Plaintiffs
In the lawsuit, the plaintiffs claimed that the company was involved in issuing USDT without any physical reserves backing them. This meant that the company had been issuing them without any backing making them high risk.
This makes USDT even riskier than TerraUSD and other stablecoins that have openly claimed that their stablecoins are not fully backed by reserve funds.
The company did it only to push the prices of different cryptocurrencies. Over time, USDT being paired with a number of cryptocurrencies managed to push its prices higher in the market.
This is something that is not allowed to be done in any trading market. Therefore, iFinex did the unthinkable by manipulating the market and helping build an extremely risky trading environment.
iFinex to Provide all Necessary Proof
The judge has reportedly accepted the request launched by the plaintiffs that are for the requests for production (RFPs).
This means that iFinex is now required to provide all the proofs pertaining to the backing of the USDT. They will need to submit all the proof/loss statements, cash-flow statements, income statements, balance sheets, and all kinds of general ledgers.
This is the only way for the company to save itself from facing a judgment being passed against it by the court.
From time to time, Tether has claimed that they have the reserve funds available to back the valuation they hold in the cryptocurrency market.
If iFinex fails to provide enough proof, then the situation would worsen for Tether and it may lose its market value.