New York prosecutors have struck back at cryptocurrency exchange provider Bitfinex, telling a local court that they believe the company should be made to turn over documents outlining a nearly $900 million line of credit offered by stablecoin issuer Tether.

The New York Attorney General’s (NYAG) office first sued Bitfinex and Tether for all documents pertaining to an alleged loss of $850 million by the exchange on April 25, at the time making public that a $625 million loan and another $900 million line of credit had been provided by Tether to help Bitfinex maintain operations in lieu of its lack of immediate funding.

The filing is the latest move in an ongoing legal battle between the NYAG and iFinex, the parent company that owns both Bitfinex and Tether, that began earlier this April.

At the time, the NYAG accused Bitfinex of not being open with Tether's customers about its move to secure nearly $1 billion from the company's funds as part of a loan. iFinex has claimed the terms were created at "arm's length" in a deal involving independent representation for both parties.

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The NYAG, in its original injunction, said they did not want to prevent Bitfinex or Tether from continuing operations, but did move to prevent Tether from lending any further funds to Bitfinex, a move Bitfinex opposed.

In Saturday’s filing, NYAG officials note that “the order does nothing to limit Respondents’ ability to operate their business in the normal course, as they have continued to do since the injunction.”

They further state that Bitfinex and Tether’s lawyers “admit” that the “narrow” injunction is legal according to state law, and their motion to vacate the order calls on the court to “simply make new law.”

Elsewhere, the filing detailed how the situation was prompted by issues at Crypto Capital, a third-party banking and payments services provider with whom Bitfinex had been holding the $850 million in question. Bitfinex maintains the funds have since been confiscated by law enforcement officials as part of ongoing actions against the company.

Notably, the NYAG used alleged inconsistencies in Bitfinex's testimony about its relationship with Crypto Capital as part of the reason more clarity is needed on the details of the loan.

The document reads:

450545 2019 in the Matter of the I v in the Matter of the I MEMORANDUM of LAW I 56 by CoinDesk on Scribd

NY Attorney General Letitia James image via Shutterstock