In re Tether and Bitfinex Crypto Asset Litigation

Background

The plaintiffs filed an application seeking to compel additional discovery from the B/T Defendants. The application concerned five categories of requested documents and information. The B/T Defendants opposed the application, arguing that they had already produced responsive materials, that some requests exceeded the scope of the discovery requests, and that certain information did not exist as preexisting records.

The court also addressed the parties’ required discussion before bringing a discovery dispute to the court. The court was dismayed that the plaintiffs appeared not to have held the required in-person or telephone conference with the B/T Defendants. It warned that future discovery requests could be summarily denied if the filing party did not represent that it had complied with this requirement.

The Five Requests

1. USDT reserves and Bitfinex payables — granted in part. The court accepted the B/T Defendants’ explanation that Tether held USDT reserves and that Bitfinex’s payables were liabilities rather than reserve assets. But the B/T Defendants acknowledged that, in some transactions, Tether temporarily counted a receivable for USDT issued to Bitfinex as part of its reserves, while Bitfinex recorded a corresponding payable. The court ordered the B/T Defendants to identify those transactions, produce relevant records, and conduct a reasonable search for other responsive records. The court did not require the PowerBoard interface itself to generate historical balance sheets.

2. Additional accounts and related assets — granted in part. The B/T Defendants were required, if necessary, to supplement their response to Interrogatory 13 by identifying additional accounts and related assets, excluding customer assets, that backed the transactions in which Bitfinex temporarily maintained a payable to Tether. The court credited the B/T Defendants’ representation that they had already produced all balance sheets showing total assets and liabilities that could be located through a reasonable search, and that the PowerBoard could not produce suitable additional records.

3. Credit-line analysis involving the Anonymous Trader — denied. The court found that the plaintiffs possessed the information needed to conduct their own analysis of the credit lines and accepted the B/T Defendants’ position that their separate analysis was attorney work product, meaning material prepared in connection with litigation that may receive legal protection. The court declined to disturb that protection and concluded that the cited precedent did not require a different result.

4. Assets backing Bitfinex credit lines — denied as moot. The court stated that financial records concerning assets Bitfinex held to cover its credit lines would fall within the scope of Revised Request for Production 29. However, the B/T Defendants represented that Bitfinex had no preexisting records tracking those assets. The court agreed that the discovery rules did not require the B/T Defendants to create a new analysis from raw database data without a stronger showing by the plaintiffs. Because the B/T Defendants represented that no additional documents existed, the court denied this request as moot.

5. Trading and loans — granted in part. The court accepted the representation that the B/T Defendants had produced transaction records responsive to Revised Requests for Production 23 through 25 and 28. But if the B/T Defendants had not already produced documents responsive to Request for Production 37 concerning loans between the B/T Defendants and the Anonymous Trader, they were ordered to do so. The court agreed that peer-to-peer loans between the Anonymous Trader and other exchange participants were outside the scope of that request.

Disposition

Judge Failla did not decide whether the B/T Defendants had withheld key documents or information, and she declined to impose the plaintiffs’ requested deadline. The B/T Defendants were ordered to comply with the discovery obligations in the order by October 13, 2023. The clerk was directed to terminate the pending motions at docket numbers 456 and 457.