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Bitfinex, iFinex And Tether – $850 Million Isn’t Lost, Our Defence Is It’s Confiscated

We’ve long pointed out that cryptocurrency allows us to see every monetary and banking scam ever invented run past us at warp speed. Everyone’s learning the same old lessons that is. The latest has led Bitcoin to fall 5% in value just on the news let alone the proof.

The story as we can unravel it. iFinex runs the Bitfinex exchange, also Tether. Tether is a stablecoin, there should be a one for one deposit of a dollar for every coin issued. OK, fine.

Bitfinex was using Crypto Capital to do its clearing for it. Crypto Capital had some funds confiscated, frozen, blocked, something. The allegation is that Bitfinex financed continuing operations by taking some to most of that one for one capital supporting Tether.

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””] In the evolving story of a so-called “stablecoin” the office of New York Attorney General Letitia James accused iFinex Inc. — operator of the Bitfinex exchange and the Tether cryptocurrency — of trying to cover up “the apparent loss of $850 million dollars of co-mingled client and corporate funds.” While researchers have tied Tether transactions to the spike in Bitcoin value that occurred between March 2017 and March 2018, this issue of the missing money is allegedly tied to a transfer of $850 million in funds to Crypto Capital Corp., a payment processor based in Panama. The AG says Bitfinex lost access to funds it had transferred there after regular banks stopped handling its business and subsequently dipped into $900 million of Tether’s cash reserves. According to the filing, Crypto Capital Corp. told Bitfinex the funds were “seized by governmental authorities in Portugal, Poland, and the United States” but the AG says Bitfinex doesn’t believe that is true. [/perfectpullquote]

The allegation in full is here:

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]The filings explain how Bitfinex no longer has access to over $850 million dollars of co-mingled client and corporate funds that it handed over, without any written contract or assurance, to a Panamanian entity called “Crypto Capital Corp.,” a loss Bitfinex never disclosed to investors. In order to fill the gap, executives of Bitfinex and Tether engaged in a series of conflicted corporate transactions whereby Bitfinex gave itself access to up to $900 million of Tether’s cash reserves, which Tether for years repeatedly told investors fully backed the tether virtual currency “1-to-1.”[/perfectpullquote]

So, money’s gone through or to Crypto Capital, Bitfinex has dived into Tether funds to cover it. That’s the basic story here.

Crypto seems to be saying that the funds were confiscated by governments – presumably on the grounds that they were breaching money laundering, know your customer, rules, that sort of thing.

Now, what’s the heart of the allegation here? The damage? That Bitfinex dived into Tether funds. If Tether’s no longer backed one for one then…..

So, what’s the Bitfinex come back here?

[perfectpullquote align=”full” bordertop=”false” cite=”” link=”” color=”” class=”” size=””]The company also said the $850 million wasn’t lost by Crypto Capital but had been “seized and safeguarded,” and it was working to reclaim the funds.[/perfectpullquote]

Note what isn’t being said. What isn’t being said is “We never touched the Tether funds”. What is being said is “We’ll get the money back”. A very different statement.

Of course, of course, that’s just a slight error in the way the press release has been written. Of course all the Tether funds are in the escrow accounts where they should be. Undoubtedly.

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Jonathan Harston
Jonathan Harston
5 years ago

Isn’t this “our shop has run out of sugar, pop down to Fred’s and buy a dozen bags using some of the float, we’ll reverse it after going to the wholesaler’s tomorrow”.

5 years ago

The funny thing is tethers are still trading at .97 USDC or so at Poloniex so it doesn’t appear to matter all that much to cryptocurrency market participants whether Tether is funny money or not. Perhaps that is because in the end it is all funny money anyway.

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