This event buckled the cryptocurrency markets. The news caused Bitcoin to fall nearly 6% to around USD 5,100, and raise questions about the viability of Tether, which many investors use as a surrogate for dollars to move in and out of different cryptocurrencies.
According to a 23-page legal filing, Bitfinex raided the reserves of a so-called stablecoin called Tether order to pay out customers demanding withdrawals from the exchange. Tether is a digital currency purportedly backed 1:1 by US dollars. The attorney general’s filing says the funds raided from Tether amount to USD 850 million. The amount of money is backed by a revolving line of credit from the exchange Bitfinex, however as the filing explains, Bitfinex appears to have borrowed that amount in order to cover a shortfall of its own.
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