CoinDesk has joined a legal proceeding between the New York Attorney General’s office (NYAG) and Tether and its parent company as part of the news organization’s effort to shed light on the reserves backing $78.4 billion of stablecoins.

Tether, together with iFinex, which owns Tether and cryptocurrency exchange Bitfinex, petitioned the New York State Supreme Court in August to block the NYAG from providing CoinDesk with documents detailing the reserves. CoinDesk is now a party to the case because it has a stake in the outcome – and the publication is arguing that the investing public does too.

“The public interest in disclosure of the requested information far outweighs any private interest [Tether] might have,” CoinDesk said in a memorandum filed with the court Jan. 4.

Neither Tether nor the NYAG objected to CoinDesk intervening in the case, according to a Dec. 20 filing signed by lawyers for all three parties. An order permitting the intervention signed by Judge Laurence L. Love was posted two days later.

In June 2021, CoinDesk filed a Freedom of Information Law (FOIL) request with NYAG asking for documents obtained during the office’s investigation of Tether and Bitfinex, which the companies had settled earlier that year for $18.5 million

The FOIL request also asked for a copy of Tether’s submission to the NYAG in May 2021, when the stablecoin issuer published a breakdown of its reserves for the first time.

This breakdown was identical to what Tether sent the NYAG’s office in accordance with a February settlement, Tether General Counsel Stuart Hoegner said at the time.

The NYAG’s FOIL officer initially rejected CoinDesk’s FOIL request. The news organization appealed, and the appeals officer reversed the decision. In its petition, Tether argued that the exact composition of its reserves is a competitive trade secret and revealing this information would hurt its business.

Assistant Attorney General James B. Cooney filed to dismiss Tether’s petition on Dec. 6.

A Tether spokesperson did not return a request for comment, but in a public statement published three days after CoinDesk’s filing, Tether said, “CoinDesk has sought to intervene in this proceeding in an effort to re-write the agreement between the New York Attorney General’s Office (OAG) and Tether and Bitfinex.”

“It is worth noting that CoinDesk and Circle, the issuer of USDC and a Tether competitor, share an investor: Digital Currency Group. CoinDesk’s coverage of its legal papers does not alert readers to this glaring conflict of interest. Weaponizing the media does a disservice to the ecosystem,” the stablecoin issuer claimed. (All CoinDesk articles automatically include a standard disclosure about its ownership.)

Public interest or trade secret?

Chiefly, CoinDesk argued in court papers that disclosing what, specifically, is backing the USDT stablecoin issued by Tether is in the public interest, and therefore should not qualify as a trade secret. Tether itself claimed it had proactively made the decision to publicize its reserve breakdown when announcing its settlement with the NYAG.

The filings were signed by the news organization’s chief content officer, Michael Casey, and submitted to the court by Lacy H. Koonce III and Olivia Hayes Franklin, attorneys at Klaris Law PLLC. They argued that “the requested information does not fall into any FOIL Exemption.”

CoinDesk’s attorneys submitted an expert’s affirmation to explain why Tether’s documents should be made public.

“In my opinion disclosing the information relating to USDT’s backing assets would allow its users and the public to properly assess the claims to stability Tether makes and would be beneficial for the functioning of the market,” wrote Robleh Ali, general manager of Wadagso Inc., a technology company focusing on digital currency and associated market infrastructure. “Tether’s claim of a secret investment strategy that cannot be disclosed to users does not conform to USDT’s purported status as a stable asset supporting the functioning of the market and is more appropriate to a hedge fund – a comparison explicitly made. USDT can either be an exotic investment with a secret investment strategy to match or a stablecoin – it cannot be both.”

Ali criticized Tether’s likening itself to Ray Dalio’s hedge fund, Bridgewater Associates, in previous filings with the court.

“[T]here is a fundamental difference between the two,” he wrote. Bridgewater “holds itself out as an investment firm designed to produce returns for its investors, not as a stable asset to facilitate trading elsewhere.”

(Also, Bridgewater lists some of its public equity holdings and their value in filings with the Securities and Exchange Commission.)

Also submitted was an affidavit, signed by the site’s executive editor, Marc Hochstein, in support of CoinDesk’s answer to the Tether petition.

Hochstein noted that New York Attorney General Letitia James said in her press release announcing the settlement that “Bitfinex and Tether recklessly and unlawfully covered-up massive financial losses to keep their scheme going and protect their bottom lines” and “Tether’s claims that its virtual currency was fully backed by U.S. dollars at all times was a lie.”

Tether has until Feb. 4 to file a response to CoinDesk’s arguments. The court is scheduled to hear the parties’ arguments on Feb. 7.

Read more:

Tether Asks Court to Block NYAG From Releasing Documents to CoinDesk

Tether’s First Reserve Breakdown Shows Token 49% Backed by Unspecified Commercial Paper

What We Know – and Don’t Know – About Stablecoins’ Dollar Backing

US Fed Official Calls Tether a ‘Challenge’ to Financial Stability

The Tether Put: Crypto Equivalent of Credit Default Swap?

A Bridge Called Tether

Millions in Crypto Is Crossing the Russia-China Border Daily. There, Tether Is King

CoinDesk Answer to Tether P… by CoinDesk

UPDATE (Jan. 4, 23:10 UTC): Updates links to court filings.

UPDATE (Jan. 7, 17:56 UTC): Adds Tether statement. Highlights CoinDesk’s automatic disclosures.