In the recent days, the world of cryptocurrencies has turned the spotlight on Bitfinex, accused of fraud for hundreds of millions of Dollars. What will be the fate of the platform and what consequences will it have on the market?

The incident began on April 24th, after that the New York State Attorney General Letitia James said in a document that her office believes that several New York-based traders have operated on the company’s platform, despite Bitfinex saying it would no longer cater to clients there in 2018.

The document also states that an investigation is underway to find out whether or not any fraud was committed by Bitfinex and Tether. In particular, the two platforms are accused of implementing secret transactions to cover Bitfinex’s losses by transferring funds from Tether’s reserves. According to the documents of the prosecutor’s office, those transactions (not disclosed to investors) would have been used to cover Bitfinex’s huge losses and the consequent inability to manage customer withdrawals. The cause of all this would appear to lie in a sale of the equivalent of over $ 850 million of clients and corporate funds combined to a Panama company called Crypto Capital Corp, all without any contract or guarantee.

On the other hand, Bitfinex defends itself against the charges, by means of a press release, stating that the funds transferred to Crypto Capital Corp would not have been lost but actually “seized and safeguarded”, and that they are working to assert their rights and obtain unblocking these funds. Initially it was believed that the seized funds consisted of the $ 400 million seized by Polish magistrates in local bank accounts, attributable to Crypto Capital Corp, for suspected money laundering of Colombian cartels. However, recently, The Block discovered that the same company, controlled by Global Trading Solutions AG, is involved in legal proceedings concerning another lawsuit. Specifically, Reginald “Reggie” Fowler, former co-owner of the Minnesota Vikings NFL team and Israeli Ravid Yosef, are accused of bank fraud. The connection with Crypto Capital Corp is constituted by the company Global Trading Solutions LLC, owned by Fowler, which appears to act on behalf of the former.

The Bitfinex affair brings to mind that of Mt. Gox, although in that case it was a vulnerability (defining “malleability of transactions” in the system that had allowed Hackers to steal about 740,000 BTC. In March Mark Karpeles, founder of the platform, was acquitted of the most serious charge of embezzlement and accused of manipulating financial data.

The Bitfinex affair is having repercussions on the world of cryptocurrencies. For example, we can see an increase in the BTC price of around $ 300 compared to other exchanges. This would seem to be due to the “exit buying” of investors who buy bitcoins at a higher price to exit the exchange forever.

On April 26, approximately 17,250 BTC (~ $ 89 million) were withdrawn from Bitfinex’s bitcoin cold wallet, plus around 633,300 ETH (~ $ 96 million). It is impossible to understand whether the wallets on which the funds were transferred always belong to Bitfinex or whether they are customers who have withdrawn their cryptocurrency in their private wallets.

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