Tether has long faced regulatory scrutiny. The Justice Department has been probing whether traders used the coins to illegally move Bitcoin prices and the Commodity Futures Trading Commission has been investigating whether Tether’s backers actually had a stockpile of cash to support the currency, according to people familiar with the matter. Officials from both agencies have also been looking into the issues raised by the New York attorney general, one of the people said.

A Justice Department spokesman declined to comment, while a CFTC spokeswoman didn’t respond to a request for comment.

No Banks

The events that triggered the New York attorney general’s suit date back to 2017 when banks stopped doing business with Bitfinex because they didn’t want to be associated with unregulated cryptocurrency trading. So Bitfinex entrusted more than $1 billion in co-mingled client and corporate deposits to Crypto Capital, according to James’ suit.

By late 2018, Bitfinex grew concerned that Crypto Capital might not return its funds, the attorney general said. That’s why Bitfinex engaged in a series of transactions to obtain up to $900 million from Tether Ltd. to cover up the potential losses, James alleges.

The company identified in Fowler’s indictment as holding bank accounts, Global Trading Solutions, is affiliated with another firm named Global Trade Solutions AG, said the people who asked not to be named because they weren’t authorized to discuss the case publicly. Crypto Capital’s website shows it is owned and operated by Global Trade Solutions.

A spokesman for the New York Attorney general’s office didn’t respond to a request for comment.

Personal Accounts

Crypto Capital was also, at least at some point last year, used by crypto exchange Quadriga CX, whose funds have mysteriously disappeared following the death of its founder, Bloomberg reported April 26.

In the Fowler indictment, prosecutors alleged that he moved millions through the U.S. financial system to support virtual currency trading. They also allege that over a two-month period last year he transferred about $60 million dollars from the illicit scheme to his personal bank accounts.