Bitfinex is making news again, and yes, it is for more bad reasons. The exchange seems to be plagued with constant troubles, having been hacked in 2015 and again in 2016. This time it seems that due to what can only be mismanagement of funds the exchange is using non-fiat assets to pay its customers, including the controversial cryptocurrency known as Tether, which is now being claimed to be backed not entirely USD, but by multiple assets which also include bank loans. This is especially odd as it has now come to light that Bitfinex was unable to establish any recent partnerships with legitimate banks.

The Unbelievable History of Bitfinex

Bitfinex has been in the game for a while, since 2012 to be precise, when they were founded as P2P Bitcoin exchange. They experienced stable growth over the next several years and garnered enough Bitcoin to gain the attention of hacker’s by 2015 when 1500 BTC were stolen from them.

The next year troubles continued when they were fined 75,000USD by the U.S. Commodity Futures Trading Commission for offering US consumers illegal off-exchanged financed commodity transactions, as well as not registering as a Futures Commissions Merchant. And in 2016 they experienced the 2nd largest hack in Bitcoin history when 119, 756 BTC was stolen totaling over 72,000,000USD in value at the time. Bitfinex was hit so hard in this attack that it took almost a year to pay back their customers.

In 2017 more bad news arose for the exchange when Wells Fargo ceased offering wire transfers to Bitfinex, causing delays in USD based withdrawals; not only did they lose their partnership with Wells, they also lost their partnership with their Taiwanese based bank. This has forced Bitfinex to continually moved between banks across the globe and because of these shady practices they have since refused to disclose where they keep their money.

In 2018 Bitfinex began requesting tax information from some customers as required by the British Virgin Island which would potentially share that information with the users’ home governments. One nail in the coffin after another. This brings us to today when they find themselves in trouble again.

Bitfinex Befouls New York

The New York Attorney General’s office believes that Bitfinex lost up to 850,000,000USD, which is an unthinkably ridiculous feat for a trading exchange. Not only did Bitfinex fail to report these loses to clients and investors, they funneled funds from the stablecoin tether to cover their loses and ensure continued operation of the exchange. The Attorney General of New York made it clear the iFinex Inc, the parent company of Bitfinex, along with Tether Limited are in violation of New York law for having defrauded New York cryptocurrency investors using the exchange.

Bitfinex is now known to have taken up to 700,000,000USD from Tether’s reserve to cover their losses, causing New York courts to order the company to cease moving funds and produce relevant financial documents detailing previous transactions between the two companies. However, the courts are also filing an injunction to force Bitfinex and Tether to continue trading so as not to negatively impact customers, so it looks like at the very least people will be able to withdraw their funds if they so chose.

Since the upcoming court proceedings have come to light Bitfinex released an official statement on the matter in an attempt to clear their name:

The New York Attorney General’s court filings were written in bad faith and are riddled with false assertions, including as to a purported $850 million “loss” at Crypto Capital. On the contrary, we have been informed that these Crypto Capital amounts are not lost but have been, in fact, seized and safeguarded. We are and have been actively working to exercise our rights and remedies and get those funds released. Sadly, the New York Attorney General’s office seems to be intent on undermining those efforts to the detriment of our customers.

It remains to be seen whether or not they will be able to prove their innocence and clear their names in court, but they will certainly have the chance, as the NYC Attorney General seems intent on moving forward with the lawsuit.

Bybit’s Take on the Situation

At Bybit we have never used Tether for any operation on our exchange as we now focus on USD trading pairs. We don’t have anything intrinsically against the stablecoin, but we feel that the US Dollar is inherently more stable as well as something our customers feel more confident using. We now offer 4 USD based trading pairs, including BTCUSD, ETHUSD, XRPUSD and EOSUSD, with plans to release more in the future. In fact, the coming weeks will see reduce only and close on trigger order types, and the coming months will see some major new announcements that will completely change Bybit for the better. Thanks for reading and stay tuned for more articles every week regarding Bybit and news from around the crypto world.