The thirty-second version

The Office of the New York Attorney General (under Letitia James) investigated Bitfinex and Tether between November 2018 and February 2021. The investigation centred on whether Bitfinex had used Tether's reserves to cover an $850 million shortfall caused by the loss of funds at a payment processor called Crypto Capital, and whether Tether had misrepresented those reserves to the public.

The settlement was announced on February 23, 2021; the agreement is dated February 17. The respondents neither admitted nor denied the OAG's findings. It imposed an $18.5 million payment, New York business restrictions and reporting obligations. This civil settlement resolved the specified New York matter, not every possible claim by every authority.

The headline numbers
$18.5 million paid to New York · two-year reporting period (Feb 2021 → Feb 2023) · ban on offering Bitfinex or Tether services to New York persons or entities · no admission of guilt · no individual sanctions.

How the investigation started

In 2018, Bitfinex (the exchange) and Tether (the stablecoin issuer) shared overlapping ownership and management. Both were operated by entities controlled by iFinex Inc. Bitfinex routed customer fiat through a payment processor called Crypto Capital Corp., based in Panama. In October 2018, Crypto Capital's accounts were seized by authorities in Poland, Portugal and the United States in connection with money-laundering investigations involving other clients. Roughly $850 million of Bitfinex customer funds were trapped or lost.

Paragraph 48 of the agreement says the earlier $625 million transfer from Tether was incorporated into a credit line allowing Bitfinex to draw up to $900 million. Those amounts must not be added as two separate loans. The public disclosure problem concerned both the inaccessible Crypto Capital funds and the use of Tether's reserves.

What the OAG found

The settlement document, available through the OAG's press archive, lays out specific findings. The three that matter for stablecoin holders today:

Finding 1. The OAG found that the dollar-backing representations did not match the arrangements during the periods investigated. Those historical findings should be read with their dates; they are neither a present reserve audit nor a clean bill of health.

Finding 2. The OAG described failures to disclose Bitfinex's liquidity problems and the transfers from Tether. The relevant chronology is in the agreement; an unexplained duration is less useful than identifying which transfer and which disclosure are being compared.

Finding 3. A civil settlement is not a criminal conviction, but that distinction does not erase its adverse findings. It would be misleading to reduce the case to a harmless difference in asset labels.

The OAG's February 2021 announcement challenged Tether's historical dollar-backing claims and the concealment of Bitfinex's liquidity problems. Read that account alongside the agreement, rather than treating the settlement as proof of today's reserves.

The two-year disclosure regime

The agreement contains both reporting to the OAG and a public reserve-composition requirement. These are separate obligations; it is incorrect to describe the public breakdowns as merely voluntary compliance with the spirit of the settlement.

The disclosure regime preceded BDO Italia's engagement. Tether's August 18, 2022 announcement says work with BDO began in July 2022. Earlier reports should retain their actual accountant's name.

What the reserve breakdowns showed (2021 to 2023)

The early breakdowns made the distinction between cash and cash equivalents visible. Commercial paper is a debt claim on an issuer, not a bank cash balance. When reading those charts, check whether a percentage refers to total reserves or to a subcategory; mixing the denominators gives a false picture of cash backing.

Tether announced on October 13, 2022 that it had eliminated commercial paper from its reserves and replaced it with US Treasury bills. That is a dated issuer statement. Later holdings must be checked against later reports rather than inferred from the announcement.

What the settlement did not do

This is the section that matters most for current holders because it is where the public conversation usually goes wrong.

Misread 1 · "The settlement proved USDT was unbacked"
The agreement documents historical problems with dollar backing and disclosure. It does not support the opposite assurance that assets matched liabilities throughout the entire period. Nor does a historical finding establish the reserve position on a later date.
Misread 2 · "The fine was a slap on the wrist"
The payment was only one part of the outcome. New York business restrictions, reporting duties and a public record of findings also mattered. An unsourced comparison with later cash flow does not measure the settlement's impact at the time.
Misread 3 · "The settlement closed everything"
The OAG settlement addressed the New York matter. The CFTC separately announced penalties of $41 million for Tether and $1.5 million for Bitfinex on October 15, 2021. Those were distinct orders with their own findings; this article does not establish the current status of other reported investigations.

What changed about Tether after the settlement

The disclosure cadence is one visible change. Current BDO reserve assurance must be distinguished from a full financial-statement audit. Read the opinion's scope and exclusions; speculation about why another accounting firm would or would not accept an engagement adds no evidence.

The asset mix is another change. Tether reports Treasury exposure alongside other asset categories. Direct Treasury bills, indirect exposure through funds or repos, and total reserves are different measures. This article does not give an undated current-dollar total or infer that a category is risk-free.

Tether announced its El Salvador relocation on January 13, 2025. Its later reserve-report notes identify Tether International, S.A. de C.V. as the fiat-token issuer. A move of domicile changes the legal context; it does not erase obligations or enforcement exposure in other jurisdictions.

How the 2021 settlement fits the 2026 picture

The current comparison needs current documents: issuer terms, reserve reports, authorisations and the routes available to the holder. USDC, EURC and FDUSD do not share a single regulatory model, so grouping them as one supervised alternative obscures the differences.

For an ordinary holder, the question is not "is USDT safe" — there is no honest binary answer to that. The question is "what specific risk does holding USDT carry, and how does that risk compare to holding USDC, FDUSD or staying in fiat?" The 2021 settlement is one of the inputs into that calculation, not the entire calculation. We covered the comparison in USDC vs USDT: which is actually safer, and the full reserve transparency picture for the current major issuers in stablecoin reserve transparency.

Three things still worth knowing about the 2021 order

The OAG's standard of proof was civil, not criminal

This was an agreed civil resolution, not a criminal trial or verdict. The respondents' neither-admit-nor-deny provision should not be confused with an adjudicated acquittal. The agreement itself is the source for what was resolved and what obligations were imposed.

The credit line and repayment are separate questions

The earlier transfer was part of the later credit facility, not an additional loan to add to its limit. Repayment and disclosure are separate questions: repayment does not retroactively make the original public statements accurate. Check a dated repayment statement for the amount actually drawn and repaid, rather than treating the facility limit as the cash transferred.

The 2021 settlement is the foundation of every subsequent argument about Tether

The NYAG agreement is a useful historical starting point, alongside the CFTC's separate order. Neither document answers every present-day question about Tether. Keep the period investigated, the regulator's findings and the latest reserve disclosure separate when evaluating commentary.

The NYAG complaint we cite

  • New York State OAG press release, "Attorney General James Ends Virtual Currency Trading Platform Bitfinex's Illegal Activities in New York", February 23, 2021.
  • Settlement Agreement, In the Matter of iFinex Inc., Tether Holdings Limited, et al., filed February 17, 2021.
  • CFTC press release, "CFTC Orders Tether and Bitfinex to Pay Fines Totaling $42.5 Million", October 15, 2021.
  • Tether reserve breakdowns from May 2021 onward, followed by quarterly attestations; BDO Italia's engagement began in July 2022. Reports are archived on Tether's website.
  • Bloomberg, "Mystery Shrouds Tether and Its Links to Biggest Bitcoin Exchange", October 5, 2017 — background on the original Crypto Capital arrangement.

Anything you can verify yourself, you should. If you spot an error or a misreading in the above, the corrections log is on the corrections page; write to [email protected] with the line.