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Topic: Bitfinex legal obligations to users (Read 2802 times)

copper member
Activity: 2996
Merit: 2374
September 08, 2016, 10:59:15 PM
#26
Speaking about legal obligation to users. Is Bitfinex refunded stolen BTC the users in any way?
They previously paid out roughly 1% of the losses to customers about a week ago. They are currently attempting to raise money via an equity sale to have sufficient funds to make their customers whole. 
legendary
Activity: 1400
Merit: 1001
September 08, 2016, 09:19:40 PM
#25
Speaking about legal obligation to users. Is Bitfinex refunded stolen BTC the users in any way?
Last time I heard about their 'refund' proposal, they were trying to force some sort of "token" refund system instead of simply paying customers their coins back.

Is there are new info about this?
newbie
Activity: 65
Merit: 0
September 08, 2016, 07:49:33 PM
#24
One would generally be advised to not assume any tangible recovery from a bankruptcy or common law liquidation. HK follows the British common law with some exceptions in deference to China's civil statutes. The US is largely based on British common law but have some 150+ years of our own. That said, pursuing an individual claim may (at this stage) appear more valuable.

The trick is that, while one could in theory sue in any Federal jurisdication in the country, you would have to assume there are assets held in the US collect on any judgment - and that can include anything you can consider; bank accounts, payment processor balances, accounts receivable, IP, etc. Given the similarity with HK law, domesticating that judgment (as I have seen it done) is not terribly difficult to accomplish

In essense, this is the proverbial race to the courthouse.
legendary
Activity: 2436
Merit: 1561
August 31, 2016, 07:26:59 AM
#23
There should be regulations put in place ensuring that all exchanges have insurance against hacks.

If an exchange is hacked, customers will be refunded by the insurance company.

That would be great, but costs of such insurance would likely be huge (if it was to cover 100% of customers' deposits) and those costs would be pushed on to customers in the form of higher fees. And if the hack happens it would probably take rather long time till insurer actually pays out.

Maybe it would make more sense for large exchanges to build up their own fiat money reserve designated to cover losses of potential hacks.
Das
sr. member
Activity: 308
Merit: 250
August 31, 2016, 07:09:28 AM
#22
There should be regulations put in place ensuring that all exchanges have insurance against hacks.

If an exchange is hacked, customers will be refunded by the insurance company.
hero member
Activity: 697
Merit: 520
August 19, 2016, 01:48:10 AM
#21
They are trying to avoid prosecution by the SEC with a rule that U.S. people can only sell BFX tokens, but they cannot buy BFX tokens. Bitfinex will argue that they aren't allowing US people to trade them because they can't buy and sell them. I don't think that strategy will work, the SEC will probably prosecute them anyway.

I'm pretty sure that strategy will blow up their face. The point of contention, I'm fairly sure, is the issuance of the unregistered securities. These are pretty clearly some kind of bond (whether convertible or not), so I can't imagine a sound legal argument that they aren't securities (at least under US law). I'm guessing the SEC will eventually come down on them (perhaps even shut them down), but US agencies take months and months to build a case and act.
sr. member
Activity: 326
Merit: 250
August 16, 2016, 08:59:38 PM
#20
So Im hearing that all US users at Bitfinex account are now frozen.
Any United States users that can confirm this?

It's unclear how many users are affected. Apparently only verified US users are affected. One of two stories is being told:

1) Synapse Pay revoked Bitfinex's access to their bank accounts and wired money held back to customers. Those users had their accounts frozen for "accounting reasons" and it's unclear how many have access to the rest of their funds now.

2) Some users had their "BitGo wallets frozen" (according to BitGo, this was actually done by Bitfinex) and for similar "accounting reasons" do not have access.

Really scary stuff for these customers.

There are a lot of restrictions on issue of "securities" in the US.
That could be one reason with Bitfinex does not want US citizens to buy these tokens.

Here's the problem: They issued the tokens to US users. These tokens are either a bond or a security -- or something in between. In any case, issuing them to US users is likely a violation of US securities law and could get Bitfinex into hot water with the SEC.

They can't really argue that they aren't allowing US users to trade them either, since they are allowed to sell them on the exchange. Unverified US users can also use all trading functionality (including margin trading and trading of the BFX token).

They are trying to avoid prosecution by the SEC with a rule that U.S. people can only sell BFX tokens, but they cannot buy BFX tokens. Bitfinex will argue that they aren't allowing US people to trade them because they can't buy and sell them. I don't think that strategy will work, the SEC will probably prosecute them anyway.
hero member
Activity: 756
Merit: 502
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August 16, 2016, 05:02:36 PM
#19
So Im hearing that all US users at Bitfinex account are now frozen.
Any United States users that can confirm this?

It's unclear how many users are affected. Apparently only verified US users are affected. One of two stories is being told:

1) Synapse Pay revoked Bitfinex's access to their bank accounts and wired money held back to customers. Those users had their accounts frozen for "accounting reasons" and it's unclear how many have access to the rest of their funds now.

2) Some users had their "BitGo wallets frozen" (according to BitGo, this was actually done by Bitfinex) and for similar "accounting reasons" do not have access.

Really scary stuff for these customers.

There are a lot of restrictions on issue of "securities" in the US.
That could be one reason with Bitfinex does not want US citizens to buy these tokens.

Here's the problem: They issued the tokens to US users. These tokens are either a bond or a security -- or something in between. In any case, issuing them to US users is likely a violation of US securities law and could get Bitfinex into hot water with the SEC.

They can't really argue that they aren't allowing US users to trade them either, since they are allowed to sell them on the exchange. Unverified US users can also use all trading functionality (including margin trading and trading of the BFX token).
legendary
Activity: 1582
Merit: 1064
August 15, 2016, 05:52:10 PM
#18
So Im hearing that all US users at Bitfinex account are now frozen.
Any United States users that can confirm this?

It's unclear how many users are affected. Apparently only verified US users are affected. One of two stories is being told:

1) Synapse Pay revoked Bitfinex's access to their bank accounts and wired money held back to customers. Those users had their accounts frozen for "accounting reasons" and it's unclear how many have access to the rest of their funds now.

2) Some users had their "BitGo wallets frozen" (according to BitGo, this was actually done by Bitfinex) and for similar "accounting reasons" do not have access.

Really scary stuff for these customers.

There are a lot of restrictions on issue of "securities" in the US.
That could be one reason with Bitfinex does not want US citizens to buy these tokens.
hero member
Activity: 697
Merit: 520
August 15, 2016, 02:19:13 PM
#17
So Im hearing that all US users at Bitfinex account are now frozen.
Any United States users that can confirm this?

It's unclear how many users are affected. Apparently only verified US users are affected. One of two stories is being told:

1) Synapse Pay revoked Bitfinex's access to their bank accounts and wired money held back to customers. Those users had their accounts frozen for "accounting reasons" and it's unclear how many have access to the rest of their funds now.

2) Some users had their "BitGo wallets frozen" (according to BitGo, this was actually done by Bitfinex) and for similar "accounting reasons" do not have access.

Really scary stuff for these customers.
legendary
Activity: 840
Merit: 1000
August 15, 2016, 11:11:17 AM
#16
So Im hearing that all US users at Bitfinex account are now frozen.
Any United States users that can confirm this?
From an article at merkel I recently read, it doesn't seem they had their accounts banned, just that a lot of of them had problems with withdrawing or trading on the website.
sr. member
Activity: 434
Merit: 250
August 13, 2016, 10:38:23 AM
#15
So Im hearing that all US users at Bitfinex account are now frozen.
Any United States users that can confirm this?
member
Activity: 112
Merit: 10
August 12, 2016, 05:49:53 AM
#14
It was a very serious thing that has made Bitcoin to fall and now the moment has come to normal. I hope never to happen ever
legendary
Activity: 1288
Merit: 1087
August 11, 2016, 03:02:59 PM
#13
I don't know if the OP of this reddit thread is correct, but he says there are rules preventing Bitfinex withdrawing coins from BitGo wallets belonging to its customers until an arbitrator decides what to do.

Bitfinex emptied all BitGo wallets anyway, but whether that was legal is an interesting question.


looks like just about anyone can empty bitgo wallets. what a top line service it is. I reckon the next week or two is the vital time. we'll see whether bfx is solvent, how this shitcoin's supposed to work and whether there's gonna be any legal action. I can't imagine there won't be.
member
Activity: 78
Merit: 10
August 11, 2016, 02:59:34 PM
#12
just amazing  Cry
sr. member
Activity: 326
Merit: 250
August 09, 2016, 07:47:21 PM
#11
I don't know if the OP of this reddit thread is correct, but he says there are rules preventing Bitfinex withdrawing coins from BitGo wallets belonging to its customers until an arbitrator decides what to do.

Bitfinex emptied all BitGo wallets anyway, but whether that was legal is an interesting question.

https://www.reddit.com/r/Bitcoin/comments/4wcspe/i_recommend_to_those_from_bitfinex_with_bitcoin/

Quote
I recommend to those from Bitfinex with bitcoin left in their wallet to login to BitGo and freeze the wallet. According to TOS 5.5 BitGo/Bitfinex is obligated to no longer use their key to move funds until an arbitrator has ruled on the dispute
legendary
Activity: 1582
Merit: 1064
August 06, 2016, 10:16:25 PM
#10
For now they've released a statement online informing its users that they'll be spreading/sharing its losses amongst all the users. They termed this as Socialized loss proposal. I'm sure they still owe people their money and will have to liquidate their assets to repay their users if they claim bankruptcy.

For now, We'll need to see if they have insurance to cover theft and how much of it do they have, cause the amount stolen is very very huge.

So what happens when the exchange returns to profits? Do the owners get the money, or do the users recoup their losses?
Ideally, the owners equity should be wiped out before users take a hit.
legendary
Activity: 3892
Merit: 4331
August 06, 2016, 10:45:05 AM
#9
Bitfinex are based in Hong Kong.  Liquidation of a company in HK is set out in the Companies (Winding Up and Miscellaneous Provisions) Ordnance.

Generally, if the company is unable to pay a debt of $10,000 or above.

The stolen/hacked btc is alleged to be worth in the region of $78M USD. If Bitfinex can show that they have enough by way of reserves to cover this amount, they would avoid Liquidation.  If they have insurance against theft (and assuming the insurance covers hacking) then they would avoid Liquidation.

Ultimately, a creditor will have to make an application to the court, after following the correct procedures for Liquidation.  In HK, I do not believe class actions are allowed by the Court.  There has been much debate in HK about class actions and maybe this event will lead the judiciary to accepting a class action system.  For now, that is not an option.

I hope this is not another Mt Gox situation, I truly hope that Bitfinex are somehow covered here but due to the large amounts taken, it is inevitable I believe that many BTC customers of Bitfinex will lose out.  

I hope people will now agree that digital currency exchanges have to be regulated properly in order for trust to grow in the industry.  If proper procedures were in place at Bitfinex, this simply would not have been possible.  Why they had such a huge amount of BTC in hot wallets and not cold storage is no doubt a question that will be asked a million times.

You got it exactly backwards.
It is BECAUSE of current regulation they had it mostly in hot wallets.
It was demanded by CFTC, and they were fined by CFTC for NOT having enough bitcoin in hot wallets, as far as I understand it.
hero member
Activity: 616
Merit: 603
August 06, 2016, 10:44:40 AM
#8
For now they've released a statement online informing its users that they'll be spreading/sharing its losses amongst all the users. They termed this as Socialized loss proposal. I'm sure they still owe people their money and will have to liquidate their assets to repay their users if they claim bankruptcy.

For now, We'll need to see if they have insurance to cover theft and how much of it do they have, cause the amount stolen is very very huge.
legendary
Activity: 1457
Merit: 1001
August 06, 2016, 10:39:34 AM
#7
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