Crypto exchange Bitfinex has been in the news a lot lately but not for all the right reasons?

Where should we start with the Bitfinex exchange, the recent news of being sued by the New York Attorney General for fraud, the exodus of users withdrawing their funds, or the desperate attempts to stay relevant in the ever-growing crypto market.

Fraud

The New York Attorney General released information early this month that they have launched a fraud investigation against the cryptocurrency exchange.

The below comment is just a snippet of what was said but they have a clear idea that Tether (Supposed to be backed 1:1 by USD) was used to cover lost funds.

“Our investigation has determined that the operators of the ‘Bitfinex’ trading platform, who also control the ‘tether’ virtual currency, have engaged in a cover-up to hide the apparent loss of $850 million dollars of the co-mingled client and corporate funds.

New York state has led the way in requiring virtual currency businesses to operate according to the law. And we will continue to stand-up for investors and seek justice on their behalf when misled or cheated by any of these companies.”

The investigation into the company uncovered Bitfinex already used $700 million of the reserves intended to collateralize the Tether coins for corporate needs leaving the Tether token not truly backed 1:1.

Tether should be backed by 2.78 Billion USD

The news has hit Bifinex hard but the Tether token hasn’t really seen any effect of the news with people still using it as their preferred stable coin, but the team at Bitfinex has come out claiming the funds are there but have been seized by the Attorney General’s office.

Exodus of users

The cold storage wallets of Bifinex have taken a beating since the news of the fraud investigation. Users have taken this a sign and have thankfully withdrawn their funds and have hopefully kept them in a less controversial location (I hope).

Ethereum has had the biggest hit on the cold wallet coffers with over 40% of the tokens being withdrawn in the past 7 days estimated at 800k, but there is still an estimated 1.1m Ethereum or $180 million worth remaining if you’re out of the loop.

If the withdrawal of Ethereum is anything to go by the exchange could be in for a very rough time going forward.

Bitfinex announces IEO to cover missing funds

The Bitfinex project has announced and IEO through one of the company’s shareholders Zhao Dong to try and claws back some of $1 billion dollars missing from the exchange’s coffers.

Bitfinex has come out claiming the $850 million dollars that are missing is currently frozen by authorities in Poland, the U.S, and Portugal and not used in illicit ways of fraud as claimed by the Attorney General.

The IEO will be available to private investors and will be made public on the May 10th if allocations remain.

The offering appears to be a cash grab by Bifinex exchange to offer liquidity to the exchange as many users have cashed out and left, or is this a “go fund me” to cover the missing USD to cover the Tether fiasco.

I’m sure we will all find out in the weeks coming but I am sure on one thing, stay away from the Bitfinex exchange especially if you want to keep your funds.

The information in this post is my own opinion from what I’ve gathered from reading online. Have a look yourself and come up with your own.