The saga continues. Despite everything that's been said about Tether and Bitfinex, defying all the scrutiny and suspicion, they continue to survive as a controversial pillar of the global crypto ecosystem. And in their ongoing legal battle with the New York State Office of the Attorney General (OAG), they continue to fight against the attempt to sue them and their parent company, iFinex. Against all the odds, they're doing a good job of holding their ground.

This was underlined most clearly at the end of July, when Justice Joel M. Cohen of the New York Supreme Court (NYSC) ruled to extend the attorney general's preliminary injunction against iFinex and its subsidiaries. This was to provide the OAG with more time to investigate its case but also to provide the judge himself with more time to decide whether to accept or reject iFinex's appeal to have the case dismissed, based on the alleged grounds that it doesn't operate in the state of New York.

But even if the same Justice Cohen has previously criticized the attorney general's injunction for being "vague, open-ended and not sufficiently tailored" to prove what has caused or will cause harm against New York residents, this latest delay doesn't necessarily mean that iFinex will have its appeal accepted. In fact, as certain legal experts suggest, the attempts to have the case dismissed on jurisdictional grounds, as well as its receipt of a stay of document demands, might indicate that it's trying to divert scrutiny away from the fundamental issue of whether it defrauded its customers.

A brief recap

On April 25, New York Attorney General Letitia James published legal filings against Bitfinex, alleging that the crypto exchange had defrauded its customers, chiefly by losing $850 million and secretly taking funds from the affiliated Tether in order to cover up this loss. A month later, on May 21, Bitfinex and Tether filed to have the case dismissed, arguing that the attorney general doesn't have jurisdiction over them since they "do not allow New Yorkers on their platforms."

Related: Tether’s Trouble With New York Attorney General — Will Crypto Cope?

Unsurprisingly, the OAG has contested these counterclaims, providing documents that purport to show that Bitfinex opened a trading account with a New York-based cryptocurrency trading firm in January 2019. However, this filing alone doesn't seem to have convinced Justice Cohen, because on July 29, he extended the injunction — largely because he required more time to decide whether to reject Bitfinex's motion or accept it. "The idea is to keep things where they are until the decision of this motion, so the decision is to extend the stay and [...] extend the injunction," he said.

What does an extension mean?

At this stage, it's hard to really know whether this extension is good or bad news for Bitfinex and crypto. On one hand, it is encouraging news, since it indicates that Justice Cohen isn't entirely convinced by the attorney general's case. Otherwise, he would have just rejected Bitfinex's appeal, but in line with his previous statements regarding the "amorphous and endless" character of the OAG's claims against the crypto-exchange, it suggests that he hasn't seen anything strong or clear enough to decide on behalf of New York.

But by the same token, it's still not wholly positive news for Bitfinex and Tether because, if the case against them were entirely meritless or unjustifiable in Cohen's view, he would have no doubt accepted iFinex's request to dismiss. He hasn't, and as Richard Howlett of the London-based crypto lawfirm Selachii Legal explained to Cointelegraph, this is because Cohen is sensitive to the possibility that new key evidence may come to light. Howlet explained further:

"Judges quite often take a view that is less risk-averse to grant an extension than to make a final decision. The worry is always that evidence will come to light at a later stage which makes the original decision wrong and an appeal will be filed. No Judge likes an appeal against a decision they have made so they err on the side of caution."

While Howlett himself doesn't say which side is likely to produce new evidence, the fact that the onus is on the attorney general to prove its case would indicate that Justice Cohen has granted an extension in the event that the OAG dredges up new, material evidence. Indeed, when asked whether the extension is good or bad news for Bitfinex, Howlett suggested that the likelier possibility is that it's good news, at least insofar as it indicates that the attorney general doesn't have especially decisive evidence right now. According to Howlett:

"Such situations are very hard to read. On the one hand, it could be argued that an extension is required as new evidence has come to light that is being investigated. Another school of thought is that the AG is desperately trying to find something to stick and need more time because they have nothing at present. If I were to gamble on this, I would say the latter, the AG has nothing and is delaying the inevitable."

Chetan Phull also provided his thoughts. He is the principal lawyer at Toronto-based Smartblock Law P.C., and is licensed in Ontario, New York State, and Massachusetts with his law practice focused in Canada. Like Howlett, he agrees that the extension will give the OAG more time to investigate its case. Phull said:

"An extension will permit further investigation of fact-based jurisdictional issues. More evidence on these factual issues could potentially enable the court to render a decision, without having to deal with certain legal questions that are better left in the hands of federal legislators currently working in this area."

Overall, there is generally a consensus that the extension has been granted in order to provide the attorney general with more time to uncover evidence. Aaron Kaplan, a former attorney who is now the CEO of New York-based trading platform Prometheum, told Cointelegraph:

"An AG should have solid proof when seeking a preliminary injunction. Seeking the investigatory extension indicates a weakness in the AG’s position. One would expect that when the AG seeks a preliminary injunction that he or she already has solid proof."

But even if an extension is arguably more indicative of a lack of significant evidence than anything else, this still doesn't necessarily mean that iFinex is on the cusp of having its appeal to dismiss granted by Justice Cohen. Kaplan went on to add:

"Don't forget, the judge and the AG essentially have the same client, they are both elected officials and are both responsible to the public interest and subject to ongoing public approval. Therefore, a judge will be hesitant to dismiss the AG’s case when the general public is allegedly being defrauded out of their hard-earned capital."

Negative impact on Tether and Bitfinex?

Even though the indecision of Justice Cohen might imply that Bitfinex could eventually escape litigation, a long, protracted injunction could already be damaging enough as it is because the more Bitfinex and Tether have their names dragged through the mud, the more traders and customers will potentially be scared away from them.

Well, maybe not exactly. While few companies benefit from associations with legal disputes, it doesn't appear that Bitfinex's business has been impaired too much by its confrontation with the New York attorney general. In terms of its adjusted trading volumes (as reported by CoinMarketCap), things have remained comparatively stable over the period between April 25 and today, even if there have been a number of dips.

Related: Tether Stablecoin: Can the Crypto Market Live Without It?

On April 25, for instance, Bitfinex's adjusted 24-hour volume was $210,787,032. This dipped after the attorney general announced that it was suing the exchange, with the volume coming in at $107,934,242 on May 1. However, a month later (June 4), its 24-hour adjusted volume was $510,369,772, while it was $494,845,894 on July 2.

Of course, as a vivid indication of just how confused and unclear this whole episode is, it's worth noting that Tether also issued a large amount of its stablecoin, USDT, over the period in question. On April 25 — the very day the attorney general announced its proceedings – Tether issued 300 million USDT. On June 11 and June 17, it printed a further 150 million and then 100 million USDT, while it has printed at least 450 million USDT since July 1.

No doubt Bitfinex and Tether will claim that this busy period of issuance was part of an attempt to meet increased demand for liquidity in cryptocurrency markets. Nonetheless, given reports and allegations that Tether has been used to manipulate the Bitcoin (BTC) and other crypto markets, it's not entirely out of the realm of possibility that newly minted USDT could have potentially been used to inflate Bitfinex's volume.

Slipping through the net?

The case against the attorney general may have been negatively affecting Bitfinex's business, but given the lack of transparency around Tether, it is hard to say for sure. Assuming Bitfinex is being hit hard by this case, there's little doubt it would have a ruinous effect if it were ultimately settled against the exchange and Tether. But this is a big assumption, and there isn't any hard evidence so far that it will be validated.

That said, a couple points can be made about the case with a little more confidence, even at this stage. First of all, it's likely that the New York attorney general is struggling to obtain concrete, damning evidence against Bitfinex. Not only is this indicated by the extension itself, but it's also indicated by the letter the OAG submitted on Aug. 1, in which it argued against the stay of demands Justice Cohen granted Bitfinex in May. This stay means that Bitfinex has to produce and release documents relevant only to whether it operated in New York. As such, the OAG is probably being deprived of documents related to the more important issue of alleged fraud, potentially hampering the case against iFinex.

Secondly, even though the OAG has yet to convince Justice Cohen that New York has jurisdiction over Bitfinex, there still seems reason to believe that the exchange has been serving customers based in the state. In addition to the evidence the OAG has already amassed related to Bitfinex opening accounts with New York-based platforms, reports emerged at the end of July that traders residing in the state have been able to register with Bitfinex simply by clicking a box that declared they aren't U.S. residents.

There's also the fact that, rather than focusing on disproving the OAG's claims that it didn't defraud its customers regarding an $850 million loss, iFinex has instead concentrated on what one could describe as technicalities. It has claimed that the New York attorney general has no jurisdiction over it, while in May, it successfully appealed for a stay of document demands, meaning that it doesn't have to turn over evidence related to whether it did cover up the aforementioned loss. Kaplan explained:

"If their position is legitimate, Bitfinex/Tether’s attorneys will provide as much information as possible to the AG, as it will continue to prove the absence of violations of law. Alternatively, if they are not confident in their position, the Bitfinex/Tether attorneys will attempt to obfuscate, confuse and dance around the issues in order to address technical defects in the AG’s case, rather than provide substantive facts.”

These facts lead us to believe that the attorney general isn't holding smoking gun evidence against Bitfinex, yet there remain legitimate suspicions that there's still a case against the exchange and its sister company Tether. This is likely why Justice Cohen has granted the extension, but if the attorney general doesn't provide hard evidence in this case soon, it's possible that Bitfinex and Tether will slip through its net.