Crypto exchange Bitfinex said Tuesday that it had begun repaying a loan from its sister company Tether.
Bitfinex borrowed as much as $700 million from the stablecoin issuer through a line of credit in early 2019, according to legal filings by the New York Attorney General (NYAG)’s office. The exchange needed the cash to make up for an $850 million hole which resulted from its payment processor, Crypto Capital, having its funds seized by authorities in three separate nations.
On Tuesday, the exchange said it had transferred $100 million from its account to Tether’s.
“Bitfinex made this payment in fiat wired to Tether’s bank account,” the announcement read. “This amount was not yet due to be paid to Tether under the facility, but Bitfinex has made the prepayment based upon its financial position at the end of the second quarter of 2019.”
“Also on July 1st, Bitfinex fully prepaid all interest accrued under the loan facility to Tether up to the end of day on June 30, 2019, also in fiat,” the exchange added.
Bitfinex and Tether have long shared key executives and shareholders, though both companies maintain that they are distinct entities. Tether’s USDT token, which usually trades around $1, is supposed to be backed 1-for-1 with U.S. dollars or cash equivalents, but the Bitfinex loan meant a portion of that collateral was replaced with the debt of an affiliated company.
Legal battle
IFinex, Bitfinex’s parent firm, and other affiliated entities are embroiled in a legal fight with the NYAG’s office over the alleged cover-up of its $850 million loss.
The company has filed a motion to dismiss, claiming that the NYAG has neither the jurisdiction nor sufficient evidence to back up its claims.
The NYAG’s office has until July 8 to file its opposition, and iFinex and its affiliated companies will be able to file their own response by July 22.
Attorneys for both sides are due back in court on July 29.
Bitfinex image via Shutterstock