New York court narrowed Tether order while restricting Bitfinex reserve loans

The New York Supreme Court narrowed an injunction against cryptocurrency exchange Bitfinex and affiliated stablecoin issuer Tether on May 16, 2019, but left important restraints in place during the New York attorney general’s investigation.

Justice Joel M. Cohen gave the preliminary injunction a 90-day term and tailored it to avoid unnecessarily interfering with legitimate business activity. At the same time, Tether was prohibited from lending assets to Bitfinex or other parties except in the ordinary course of its business. Distributions from Tether’s reserves to executives, employees or other insiders were also restricted, apart from ordinary payroll and payments to contractors, consultants and vendors.

Bitfinex and Tether additionally remained barred from altering or destroying material covered by the attorney general’s document demands. The order therefore represented neither a termination of the investigation nor an adjudication that the attorney general’s allegations were true.

A narrower order, not an exoneration

The dispute began with an April 24, 2019 ex parte order obtained under Section 354 of New York’s Martin Act. The Office of the Attorney General alleged that Bitfinex had lost access to more than $850 million in commingled client and corporate funds placed with payment processor Crypto Capital Corp. The office further alleged that Bitfinex’s operators arranged access to as much as $900 million of Tether’s reserves to address the resulting liquidity problem.

Those figures were allegations from an ongoing investigation on May 16, not judicial findings of fraud or a final calculation of recoverable losses. Bitfinex and Tether disputed the attorney general’s characterization, challenged the breadth of the original order and contested New York’s authority over their businesses.

The May 16 ruling granted part of their requested relief. It replaced what the companies characterized as an open-ended restraint with a defined 90-day period and permitted ordinary operations. It did not, however, grant their request to vacate the attorney general’s investigative document demands. The court said intervention at that stage should protect legitimate law-enforcement concerns without imposing unnecessary commercial restrictions.

Tether presented the modification as a victory and said the companies could continue operating normally. That was an attributable party claim, not a neutral description of every provision. Contemporaneous reporting emphasized the other side of the order: Tether could not use its reserves for additional loans to Bitfinex outside ordinary business, and the attorney general could ask the court to extend the injunction before it expired.

Why the reserve boundary mattered

USDT was designed to trade near one U.S. dollar and served as a widely used settlement asset across cryptocurrency exchanges. Questions about whether its reserve assets were available to support an affiliated trading venue therefore extended beyond an ordinary dispute between related companies. The case raised immediate issues of conflicts of interest, reserve transparency and the separation of customer-facing promises from intercompany financing.

The order did not establish the composition or value of Tether’s reserves on May 16. It instead preserved the status quo around disputed transfers while allowing the investigation and document production to continue. That procedural distinction matters: a preliminary injunction manages risk during litigation or investigation; it does not resolve liability.

Market context and limits

Kraken’s venue-specific report for May 16 recorded approximately $600 million traded across its markets. It listed BTC at $7,840, down 4.27% for its reporting period, while ETH was $260.20, up 7.47%. These figures describe Kraken’s own daily measurement, not a consolidated global close. Cryptocurrency traded continuously across multiple venues, and prices, volumes and cutoff times differed by exchange.

The record does not establish that the court order caused those moves. The defensible significance of May 16 was institutional: a state court reduced an overbroad restraint while maintaining controls intended to prevent further disputed use of stablecoin reserves and preserve evidence.