Bitfinex Sues Wells Fargo Over Wire Transfer Suspension

Bitfinex, on Wednesday, filed a lawsuit against Wells Fargo for suspending its outgoing U.S. dollars wire transfers. In addition to “a preliminary and permanent injunction against Wells Fargo,” the exchange is seeking compensatory damages in excess of $75,000 and any additional relief the court may deem fair as well as a jury trial for the case.

Also read: Bitfinex Makes Good on Debt, 100% of BFX Tokens Redeemed

The plaintiffs of the lawsuit are Ifinex, which operates the Bitfinex exchange, and its two subsidiaries: BFXNA Inc and BFXWW Inc. They are joined by another Hong Kong-based company, Tether Limited, as the fourth plaintiff. The defendants are Wells Fargo & Company and its subsidiary, Wells Fargo Bank.

Bitfinex’s Problems

The court document states that Bitfinex is a customer of four Taiwan-based banks but is not itself a customer of Wells Fargo. However, its banks in Taiwan use Wells Fargo as a correspondent bank to process U.S. dollar wire transfers, which is a normal practice in cross-border payments.

For two years, Wells Fargo has been performing its duty as a correspondent bank for the Taiwan-based banks. The company processed incoming and outgoing U.S. dollar wire transfers for accounts that list Bitfinex and its customers as beneficiaries. Bitfinex claims that Wells Fargo knew of its digital currency business through the Taiwan-based banks’ know your customer (KYC) process.

However, in the latter half of March, Wells Fargo informed the Taiwan-based banks that it would no longer process outgoing wire transfers for Bitfinex’s correspondent accounts, but it did not contact Bitfinex to give any explanations or request information. While outgoing wires have been suspended, incoming wires into Bitfinex’s accounts continue to be processed as usual.

Bitfinex claims that Wells Fargo’s sudden action has prevented it from fulfilling its obligations to its customers, which has “presented an existential threat” to its business. This will result in the exchange losing its existing and prospective customers as they would see the failure in wire transfers as Bitfinex’s own fault, the court document describes. Furthermore, it states:

They [plaintiffs] informed Wells Fargo that if plaintiffs could not remit to customers U.S. dollars that belong to their customers, plaintiffs’ businesses would be crippled as of Wednesday April 5, 2017. They would be brought at a standstill.

What Will Bitfinex Do?

The plaintiffs seek “a preliminary and permanent injunction against Wells Fargo to prevent it from suspending, rejecting, or refusing to process wire transfers in U.S. dollars from plaintiffs’ correspondent accounts without notice and without the opportunity for plaintiffs to address any possible due diligence concerns,” the court document details.

They are also requesting the court to enter a judgment against Wells Fargo in excess of $75,000 in their favor “for the damages sustained as a result of the wrongful conduct alleged and as will be established through discovery and/or at trial, together with interest thereon.” In addition to a jury trial, they are also seeking any further relief the court may deem “just and proper.”

Since the news of the lawsuit started spreading, some in the Bitcoin community are claiming that Bitfinex’s funds were frozen by Wells Fargo. On Reddit, a user wrote “$180 million USD belonging to Bitfinex and Tether.io frozen by Wells Fargo.” The $180 million figure comprises of Bitfinex’s customer deposits of $130 million held at banks in Taiwan plus Tether’s $50 million. A Bitfinex representative quickly got on the social media site to do some damage control, stating that:

Funds are not frozen. Bitfinex does not bank with Wells Fargo who are simply acting as a correspondent bank. They have chosen to block wire transfers between us and our customers which we are challenging in court.

In addition, another Bitfinex representative wrote on Reddit: “We have alternative channels available to us and are working on processing withdrawals at a delayed pace due to the operational overhead involved.”

Do you think Bitfinex will be successful in suing Wells Fargo? Let us know in the comments section below.

Images courtesy of Shutterstock, Wells Fargo and Bitfinex

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