The New York Attorney General’s office has recently found out that crypto exchange Bitfinex used funds from affiliated stablecoin operator Tether to secretly cover the loss of $850 million dollars of co-mingled client and corporate funds.

Attorney General Letitia James announced that her office had obtained a court order enjoining iFinex Inc., the operator of Bitfinex and Tether Limited, and their related entities, from further violations of New York law and defrauding New York residents.

According to the filling, Bitfinex never disclosed the loss to its investors. The executives of Bitfinex and Tether are accused of engaging in “a series of conflicted corporate transactions” whereby Bitfinex gave itself access to up to $900 million of Tether’s cash reserves to hide undisclosed losses and inability to handle customer withdrawals.

“Our investigation has determined that the operators of the ‘Bitfinex’ trading platform, who also control the ‘tether’ virtual currency, have engaged in a cover-up to hide the apparent loss of $850 million dollars of co-mingled client and corporate funds. New York state has led the way in requiring virtual currency businesses to operate according to the law.  And we will continue to stand-up for investors and seek justice on their behalf when misled or cheated by any of these companies.” said Attorney General James.

The court order requires that the operators of the companies immediately cease further dissipation of the U.S. dollar assets which back “tether” token while the Office continues conducting investigation related information and documents.

Late Thursday, Bitfinex has made official announcement claiming that the court filings were “written in bad faith” and they would “vigorously challenge this, and any and all other actions, by the New York Attorney General’s office.”

The announcement confirmed that the Crypto Capital amounts are not lost but have been, in fact, seized and safeguarded”. Bitfinex and Tether claimed to actively work on exercising their rights and remedies and getting those funds released.