Cryptocurrency exchange Bitfinex will have to face allegations from New York State that it hid millions in lost funds, according to a ruling by the State Supreme Court’s Appellate Division on Thursday. 

New York prosecutors alleged in April 2019 that Bitfinex lost $850 million in client and corporate funds, and then used money from affiliated stablecoin Tether to cover the loss. Bloomberg first reported the ruling.

iFinex, which operates both Bitfinex and Tether, argued the funds had been deposited with a Panama-based company and were later seized by authorities in different countries. The firm had earlier also said it has been working to recover the funds seized by the Portuguese, Polish and American governments. 

In its decision, the appeals court rejected the argument that tether was neither a commodity nor a security, and affirmed the stablecoin falls under the court’s jurisdiction. 

“Not even virtual currencies are above the law,” New York Attorney General Letitia James told CoinDesk in a statement.

As it’s headquartered in Hong Kong and registered in the British Virgin Islands, Bitfinex had also argued it does not fall under the jurisdiction of state authorities and doesn’t cater to local traders. 

The court rejected the argument on the grounds the Attorney General’s office was seeking documents going back to 2015, and iFinex had permitted New York customers to trade on the Bitfinex platform until January 2017. In addition, the court noted some of the firm's executives had been based out of New York. 

“We will respect the court's order. We have no further comment on this matter at this time,” BitFinex’s General Counsel Stuart Hoegner said in an emailed statement.

Read the court ruling below: