This is Why Bitcoin Took a Nasty Tumble

Cryptocurrency Bitcoin took a fall this Thursday after Wall Street learned about a multi-million dollar alleged fraud.

The New York’s attorney general has accused the owners Bitfinex, of using illicit transactions to mask $850 million in missing funds.

A 23-page legal filing alleges that Bitfinex raided the reserves of a so-called stablecoin called Tether in order to pay out customers demanding withdrawals from the exchange.

Tether is a digital currency purportedly backed one-to-one by U.S. dollars.

The filing also says that the funds raided from Tether amount to $850 million.

Chad Cascarilla, who is head of a company called Paxos that makes a rival stablecoin, believes the figure would account for at least 27% in Tether’s dollar reserves.

“The situation looks bad. We have more than 500 withdrawals pending and they keep coming in … [T]oo much money is parked with you and we are currently walking on a very thin crust of ice,” said a Bitfinex executive under the name “Merlin.”

Bitcoin fell nearly 6% to around $5,100 after traders learned about the news.