Bitfinex is one of the largest cryptocurrency exchanges, founded in 2012, with a daily trading volume estimated at hundreds of millions of dollars. It is owned by iFinex, of which Tether is also a part - a project to launch the first steyblecoin, secured by US dollars and included in the top 10 cryptocurrency capitalization. But the work of iFinex constantly raises questions from both the crypto community and law enforcement agencies. For nearly a month, the company has been suing the New York State Prosecutor’s Office. But despite the constant scandals Bitfinex managed in less than two weeks to collect $ 1 billion in the closed round tokensale. What happens to Bitfinex and what are the reasons for its sad experience.
It is not known for certain exactly which banks Tether cooperates with and where the company keeps reserves (their official reports on this issue are at least contradictory). At the same time, new details in this matter are found out only when Bitfinex starts to have any problems.
For the first time, the company got into the center of the scandal in 2017, when the American bank Wells Fargo suddenly refused to cooperate with iFinex, as a result of which the processing of Bitfinex transactions was temporarily suspended and a large amount of funds was blocked. In response, Bitfinex filed a lawsuit against the bank, but a week later the suit was withdrawn. In the fall of 2018, Bloomberg published information that Puerto Rican Noble Bank, which had collaborated with Tether and Bitfinex after Wells Fargo, was ruined as a result of the crypto companies ceasing to be its customers. It is noteworthy that this news coincided with the "technical" problems that arose with the clients of the exchange when withdrawing fiat funds from Bitfinex and the complaints of traders about the long waiting for withdrawals. According to Block Crypto, in mid-October 2018 after Noble Bank, the Hong Kong-based Bank of Communications became Bitfinex’s banking partner, while Tether’s reserves were kept in Deltec Bank, registered in the Bahamas (also offshore).
In the spring of this year, Bitfinex and Tether are once again facing a banking scandal. It became known that in 2018 Bitfinex and Tether agreed on processing with Crypto Capital Corp. Details about what happened next, wrote DeCenter. The essence of the incident is as follows: fiat money customers worth $ 850 million for one reason or another "stuck" on the side of Crypto Capital Corp., and to fulfill the obligations, Bitfinex covered these losses from the Tether reserve fund. This scheme was publicly disclosed by the New York State Prosecutor's Office, which in April accused of misinforming and deceiving iFinex clients and filing a lawsuit against the company.
The Bitfinex management denied these allegations. Even the CEO of Bitfinex broke his silence, saying that the lawsuit "is filled with inaccuracies and false statements." In addition, one of the shareholders of Bitfinex then quoted the words of the financial director Devasini in private conversation: he said that Bitfinex needed “only a few weeks” in order to get back company funds from Crypto Capital. It should be noted that the rumors about the confiscation of funds appeared in the spring of 2018, but then the administration of iFinex denied them
The scandals around Bitfinex and Tether show how opaque the cryptocurrency market really remains. This is another reminder that users for the most part do not know anything about the real activity and financial state of cryptocurrency exchanges. Moreover, they are not even convinced of the biographies of the founders of trading platforms.
This opacity is a consequence of the absence of legislative and industry standards for financial activity. So, Tether, for example, repeatedly attracted an external auditor to check the reserves, but few people were convinced by the results of this work. However, iFinex can also be called a victim of circumstances. After all, Tether was a pioneer in the field of stable cryptocurrency, secured by assets. And the problems that have arisen with it turned out to be related, among other things, to the flaws in the legislation that do not allow building stable and permanent work of cryptocurrencies with the official financial world.
It is possible that litigations like the litigation with iFinex will help uncover the problems that crypto industry players so diligently hide under the carpet and bring the adoption of the rules necessary in the field of cryptocurrency trading closer. In the meantime, the notorious bridge between the world of cryptocurrency and Fiat is still too unreliable.