Topic: NY Attorney General sues Bitfinex (Read 329 times)

Arizona Man And Israeli Woman Charged In Connection With Providing Shadow Banking Services To Cryptocurrency Exchanges

Geoffrey S. Berman, the United States Attorney for the Southern District of New York, William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Jonathan D. Larsen, Acting Special Agent in Charge of the New York Office of the Internal Revenue Service, Criminal Investigation Division (“IRS-CI”), announced the arrest today of REGINALD FOWLER on charges of bank fraud and operating an unlicensed money transmitting business.  Bank fraud charges were also unsealed against co-conspirator RAVID YOSEF, who remains at large.  FOWLER and YOSEF, who worked for several related companies that provided fiat-currency banking services to various cryptocurrency exchanges (the “Crypto Companies”), allegedly participated in a conspiracy in which FOWLER made numerous false and misleading statements to banks to open bank accounts that were used to receive deposits from individuals purchasing cryptocurrency, and in which FOWLER and YOSEF falsified electronic wire payment instructions to conceal the true nature of a voluminous cryptocurrency exchange business.  Hundreds of millions of dollars flowed through the Crypto Companies’ accounts from banks located across the globe. FOWLER will be presented today in federal court in Phoenix, Arizona.  The case is assigned to U.S. District Judge Andrew L. Carter Jr.

Hmm. I dunno. For the longest time an awful lot of people were fully convinced it was 100% fictional. The one thing that's come out of this ballsup is confirmation that it was properly backed once upon a time.

They're also taking steps to restore it. Whether people will swallow BFX's shit again is another matter but they probably will. This time around if their weird IEO sale succeeds then that's real backing from real people out in the open which is a first for Tether.

If that completes Tether is then in the strongest position it's ever been in in terms of nixing the scepticism that's always surrounded it.

Then again all of these legal proceedings might unearth some much more unsavoury practices along the way.

That's a lot worse than a I thought. It's amazing that Tether holders seem to remain so confident. CMC still has it trading at $1.01.

I don't think bitfinex has $850M+ in reserves because they have a practice of paying most of their operating earnings to shareholders.

https://www.coindesk.com/tether-lawyer-confirms-stablecoin-74-percent-backed-by-cash-and-equivalents

'Tether’s reserves of cash and cash equivalents alone (without the line of credit) would cover approximately 74 percent of the outstanding amount of tether.'

I wonder how this will be digested. My guess is no one's going to care just like 'real' fiat.

I think they might have held off on starting litigation out of not wanting the issue to be public. With the NYAG changing these circumstances, they no longer have that problem.

Their saying that they will get the money back within a few weeks is also overpromising.

Bitfinex does not currently have access to $850M worth of USD. Some of this money is customer deposits, and bitfinex did not disclose this to the public until the NYAG disclosed this fact for them.

The failing to disclose the missing USD is probably something most of their customers will frown upon.

neither the NYAG nor bitfinex could actually confirm the $850m in crypto capital funds held on behalf of bitfinex was seized: https://bitcoinmagazine.com/articles/bitfinex-faces-legal-action-from-ny-attorney-general-heres-what-this-means/

so we're not really sure if it was stolen or seized. in the end, it doesn't really matter and bitfinex is clearly spinning things. the important fact is that bitfinex lost access to $850m, couldn't process its customer fiat withdrawals, and dipped into tether funds to cover the shortfall. depending on other assets held by bitfinex/tether, they may not be insolvent. but this certainly suggests they are.

So it's possible Bitfinex hasn't done anything wrong, with Crypto Capital the only culprit? Hmmm...

The statements released by the AG and Bitfinex are indeed of conflicting nature, yet I for one thinks that Bitfinex is on the wrong here due to the nature of its relationship with Crypto Capital. No contracts whatsoever are binding their relationship with each other, and one party, Crypto Capital, can just run away with the money and Bitfinex can't do something about it. As for operations, many traders have already been pulling out assets from the exchange in question, and could potentially lead to its closure just months after this case was filed.

Poor finex, but they had it coming anyway.

Yes, Bitfinex isn't saying enough, or isn't saying the truth. It says 850 millions have been seized, and that is certainly possible, but in that case, it means there are legal proceedings which could prove the seizure. Only thieves seize money without traces.

I found two articles to be about what I presume you are referring to.

Bitfinex had to borrow $700M from tether, out of the $850M that is unaccounted for. It would not be unreasonable to say Bitfinex had $150M in reserves.

If the $370M is in fact part of the $850M, Bitfinex's ability to recover the money will depend largely on if they were properly served with the seizure notice, and what they did to that customer's account.

Worse case scenario, if Bitfinex was properly served, but they eventually successfully processed a withdrawal for the customer despite the seizure notice, they will be on the hook for the entire $370M, and this money is in fact gone. If the customer for example withdrew bitcoin, deposited the bitcoin to binance for example, and binance properly froze access to the money, Bitfinex *might* be able to get the $370M back, but I am not an expert in this area, and am not explicitly sure.

A best case scenario is Bitfinex froze this customer's account and the account is currently containing at least $370M. In this case, Bitfinex could simply administratively debit the customer's account to cover the difference, and the customer could try to recover the money from Poland themselves if they have a legitimate claim to it.

If Bitfinex was not properly served with a seizure notice, and let the customer withdraw, the case becomes more complicated, and potentially will be drawn out.