Bitfinex’s customers might suffer if it can’t access a line of credit from stablecoin issuer Tether, the exchange’s attorneys argued Sunday.
In a new filing, attorneys Jason Weinstein and Charles Michael of Steptoe and Johnson, and David Miller and Zoe Phillips of Morgan, Lewis and Bockius, outlined a number of arguments for why a preliminary injunction secured by the New York Attorney General at the end of April should be canceled or modified.
Among them, the lawyers claimed the injunction would harm the startups’ customers, and in turn the market as a whole. They wrote:
“The balance of equities strongly favors Bitfinex and Tether, because a preliminary injunction would not protect anyone but would instead cause great disruption to Bitfinex and Tether — ultimately to the detriment of market participants on whose behalf the Attorney General purports to be acting.”
Since the injunction’s filing, Bitfinex’s customers have withdrawn 30,000 bitcoin and 1 million ether at least, indicating that it had a “significant” impact on the exchange, the filing said. Already, the market capitalization of “dozens of cryptocurrencies” lost $10 billion within an hour after the order came out on April 24.
The impact on USDT, the dollar-pegged cryptocurrency issued by Tether, has been much smaller, as “Tethers still trade at par to this day, despite this proceeding,” the filing states.
Stepping back, the preliminary injunction, filed under a New York state law called the Martin Act, requires Bitfinex and Tether to turn over every document pertaining to a $625 million transfer and a subsequent $900 million line of credit Tether extended to Bitfinex after the latter lost access to $850 million held by its payment processor,