From paragraph 60 in the filing (emphasis is mine):
"As explained to OAG attorneys by Respondents' counsel. Bitfinex and Tether have also used a number of other third party payment processors to handle client withdrawal requests, including various companies owned by Bitfinex/Tether executives, as well as other 'friends' of Bitfinex - meaning, human being friends of Bitfinex employees that were willing to use their bank accounts to transfer money to Bitfinex clients who had requested withdrawals."
Is this a surprise to anyone? I was under the impression that even the most ardent HODL-er thought Tether was, at best, a very risky investment, and more likely a total scam.
This is pretty big news; the entire cryptocurrency economy relies on tethers being valued at par, given that they're how billions of dollars of liquidity are denominated. While rumors and suppositions about Tether have swirled for quite some time, that was also true of Mt. Gox before the fall, and those of us who have been saying loudly that they're insolvent have not been widely believed.
But from this, it looks like Bitfinex was completely amateur hour, and that—but for Tether being raided to cover the results of that—Tether might not have been a scam at all.
WELL, do note that this is about an infraction that occurred in mid-2018, LONG after the "ardent HODL-ers" were skeptical about it and while Tether had its highest level of confidence in the market, instead of like 2016.
So it is almost like a caricature of its own criticisms.
Most people willingly ignored this because they feared that panic and a'bank run' on tether would cause a crash similar to Mt.Gox.
Tether is infact a fed instead of the fed, but without the largest military power in the world to defend it, a scam that is backed by nothing and there have been a lot of attempts to point that out. Check out 'bitfinexed' on twitter and medium.
Bad news is that so many exchanges use it as it is such a useful instrument for users who wish to get out of crypto temporarily when their exchanges don't support fiat trading.
Crypto Capital has claimed that the money is frozen and that's why they can't send it back. Execs at Bitfinex/Tether believe maybe Crypto Capital's principal, Ivan Lee, has stolen it and that's why he won't send it back. The NY AG contacted Portugese and Polish authorities and, from them, was informed that there were no official orders freezing Crypto Capital bank accounts in those countries. So the most likely scenario by far is that Ivan Lee has stolen the money.
The NY AG then files a civil lawsuit against Bitfinex, and in doing so reveals to Ivan Lee that the US government is aware that he has stolen the money.
But he (Ivan) has not yet been arrested. So now we have a guy who has committed a massive crime and who is comfortable with tax havens and living internationally and corrupting institutions and who has been given a fair warning to go into hiding before he inevitably is indicted. Oh, and he has $850,000,000. Doesn't he sound like, idk, a flight risk? If he flees, regardless of iFinex's failure to disclose the suspected loss to investors, gross negligance on behalf of the NY AG may contribute to investors losing $850 MM.
Why wouldn't they criminally charge the guy who they strongly imply has actually stolen the money first before they file a civil suit against the victims* dumb enough to send it to him? (* This is called VAF - Victim Assisted Fraud)
There's a lot of angles from which to look at this. Bitfinex/Tether are shady, no doubt. But if the NY AG actually believes what they are purporting to, this stands out to me as a bizarre choice.
"The NY AG contacted Portugese and Polish authorities and, from them, was informed that there were no official orders freezing Crypto Capital bank accounts in those countries"
I've read the 24 pages report and missed that part, could you quote it please?
To me, the whole thing looks like this: "Hey Bitfinex, you can't keep running your operations when you're missing 800M. We know that, because we're the one who seized that money from you"
"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.” https://cointelegraph.com/news/tether-hits-back-at-claims-it...
So basically they are saying Ivan didn't nick it - the authorities froze it.
I think the news was out for some time and only now the rumor started to confirm.
Tether is trading at exactly $1/$1 on Kraken. It had touched $0.85/$1 on October 2018 though. It was discounted for the last quarter of the last year. The discount lasted for several months suggesting lack of liquidity and possibly lack of funds.
The Tether discount suddenly disappeared. And suddenly a discount/premium appeared on Bitfinex. However, that discount was getting smaller everyday and almost disappeared (until a bit earlier but still negligible in the volatile crypto market).
I personally hold a significant amount of USDT/Finex Dollars and not worried. I think the price is more relevant than the news. The probabilities or lack of funds will be builtin in the price. And the current price suggests that iFinex has got its shit together.
> And the current price suggests that iFinex has got its shit together.
Or, it could mean that they keep buying up coins on the market at face value to keep prices stable to avoid a run on the bank (which they can only do as long as their reserves remain).
You are holding counterfeit money and hoping you can offload it before the shit hits the fan. When everyone starts running for the exit, you may not be in the front of the pack.
I imagine that bitfinex/tether is liquidating reserves to hold the peg. They can keep it pegged until they run out of money and then not only is tether worthless but so are all your coins on their exchange (and probably most other exchanges that use tether). That’s how bank runs work.
This seemed inevitable for a long time. Tether is very important for maintaining the price of bitcoin, and yet the stablecoin’s financial condition has been an unanswered question. The company has raised every red flag and in a rational market, tether would have been priced at pennies in the dollar, with a corresponding markdown for bitcoin with the loss of “convertibility” to dollars.
And I honestly am surprised how pedestrian the fraud was. It sounds like they had the cash to back tether and just flat out stole it to cover for a trading loss. This has happened countless times before.
Predictably, the BTC/USDT market (on Binance) is showing an inflated price for BTC as people try and bail out. Elsewhere the price of BTC is falling. It's impossible to tell the real price anymore because, for the moment, both actions are cancelling each other out.
Speaking as someone who was deeply interested in bitcoin in ~2013, cryptocurrency today is a wretched hive of scum and villainy. When someone tells me today that they are working on something related to crypto I make a mental note to never work with them or take anything they do seriously.
The other interesting speculation with Bitfinex is they may have used Tether money to manipulate the Bitcoin price. I wonder if we will get more info there.
Doesn't sound like the $850M went missing, more like someone cashed out. Unless hiring a company to do what you say your company is doing, then handing it all your funds immediately, allows any other conclusion.
I'm not sure how you came to this conclusion. Bitfinex sent $850M to allow withdrawals to be paid, but very few, if any, were. Witness communications like "you said this would be resolved, but that was a month ago, and not a single wire transfer has taken place".
> The attorney general said Bitfinex’s problems began in 2018, when it handed over $850 million to third-party payments processor Crypto Capital Corp. to handle customers-withdrawal requests. Over the months that followed, Panama-based Crypto Capital failed to process the orders, the attorney general said.
For all the noise about Tether being insolvent, it turns out that it was completely solvent? Then in 2018, Bitfinex got taken by Crypto Capital and raided the Tether reserves for $850M backing the Tether issuance?
So if I'm reading this right: The holders of tether are now screwed and should be converting to bitcoin/litecoin/etc asap.
Isn't this the same exchange that got hacked, and socialized the losses throughout their customer accounts? They've been shady on many fronts for a long time.
Tether was questionable since day one. They never really substantiated their claim of full-backing through a real audit of their currency reserves. Tether was the successor to Realcoin which was backed by Brock Pierce. Brock Pierce is co-founder of EOS which had the 4 billion dollar ICO.
[+] [-] nwj|7 years ago|reply
"As explained to OAG attorneys by Respondents' counsel. Bitfinex and Tether have also used a number of other third party payment processors to handle client withdrawal requests, including various companies owned by Bitfinex/Tether executives, as well as other 'friends' of Bitfinex - meaning, human being friends of Bitfinex employees that were willing to use their bank accounts to transfer money to Bitfinex clients who had requested withdrawals."
[+] [-] apo|7 years ago|reply
https://iapps.courts.state.ny.us/fbem/DocumentDisplayServlet...
[+] [-] berbec|7 years ago|reply
[+] [-] patio11|7 years ago|reply
[+] [-] dragonwriter|7 years ago|reply
[+] [-] caprese|7 years ago|reply
So it is almost like a caricature of its own criticisms.
[+] [-] kacamak|7 years ago|reply
Tether is infact a fed instead of the fed, but without the largest military power in the world to defend it, a scam that is backed by nothing and there have been a lot of attempts to point that out. Check out 'bitfinexed' on twitter and medium.
[+] [-] unknown|7 years ago|reply
[deleted]
[+] [-] h1d|7 years ago|reply
https://coinmarketcap.com/currencies/tether/#markets
People will use it until it gets burnt and crashed.
[+] [-] andrewdubinsky|7 years ago|reply
[+] [-] Grustaf|7 years ago|reply
[+] [-] 55555|7 years ago|reply
Crypto Capital has claimed that the money is frozen and that's why they can't send it back. Execs at Bitfinex/Tether believe maybe Crypto Capital's principal, Ivan Lee, has stolen it and that's why he won't send it back. The NY AG contacted Portugese and Polish authorities and, from them, was informed that there were no official orders freezing Crypto Capital bank accounts in those countries. So the most likely scenario by far is that Ivan Lee has stolen the money.
The NY AG then files a civil lawsuit against Bitfinex, and in doing so reveals to Ivan Lee that the US government is aware that he has stolen the money.
But he (Ivan) has not yet been arrested. So now we have a guy who has committed a massive crime and who is comfortable with tax havens and living internationally and corrupting institutions and who has been given a fair warning to go into hiding before he inevitably is indicted. Oh, and he has $850,000,000. Doesn't he sound like, idk, a flight risk? If he flees, regardless of iFinex's failure to disclose the suspected loss to investors, gross negligance on behalf of the NY AG may contribute to investors losing $850 MM.
Why wouldn't they criminally charge the guy who they strongly imply has actually stolen the money first before they file a civil suit against the victims* dumb enough to send it to him? (* This is called VAF - Victim Assisted Fraud)
There's a lot of angles from which to look at this. Bitfinex/Tether are shady, no doubt. But if the NY AG actually believes what they are purporting to, this stands out to me as a bizarre choice.
[+] [-] stzup7|7 years ago|reply
I've read the 24 pages report and missed that part, could you quote it please?
To me, the whole thing looks like this: "Hey Bitfinex, you can't keep running your operations when you're missing 800M. We know that, because we're the one who seized that money from you"
[+] [-] tim333|7 years ago|reply
"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.” https://cointelegraph.com/news/tether-hits-back-at-claims-it...
So basically they are saying Ivan didn't nick it - the authorities froze it.
[+] [-] unknown|7 years ago|reply
[deleted]
[+] [-] arcticfox|7 years ago|reply
https://www.reddit.com/r/Bitcoin/comments/bha10i/bitcoins_fr...
[+] [-] danaos|7 years ago|reply
[+] [-] aedron|7 years ago|reply
> One of the world’s most widely traded virtual currencies faces renewed doubts about its stability [...]
Tether is nothing in terms of crypto currency penetration. It does not even have a percent of daily trading. Then a few paragraphs down:
> [...] within an hour of the attorney general’s statement and Tether slid 1.4 percent.
1.4 per cent. Even big cap stocks fluctuate that much some days.
> At the time of the correspondence, Bitcoin was trading at around $6,500. It dropped 4.7 percent to $5,236.03 at 12:10 p.m. in Hong Kong on Friday.
So they mention a price from 8 months ago, and then mention yesterday's price, implying that it fell that much because of this event.
Garbage journalism.
[+] [-] ccjnsn|7 years ago|reply
It's volume is 2nd only to Bitcoin per [1]coinmarketcap.
With your 3rd point about pricing changes, yeah correlation/causation, it's a theory that is plausible though.
1.coinmarketcap.com
[+] [-] tim333|7 years ago|reply
Looking at coinmarket cap just now it's No 2 by 24hr trading volume. Bitcoin $18bn, Tether $16.5bn, Ethereum $8bn, all others less than 4.
[+] [-] faxi|7 years ago|reply
If those were the prices before and after, the drop was 19.45%.
[+] [-] arisAlexis|7 years ago|reply
[+] [-] patio11|7 years ago|reply
[+] [-] animex|7 years ago|reply
[+] [-] csomar|7 years ago|reply
Tether is trading at exactly $1/$1 on Kraken. It had touched $0.85/$1 on October 2018 though. It was discounted for the last quarter of the last year. The discount lasted for several months suggesting lack of liquidity and possibly lack of funds.
The Tether discount suddenly disappeared. And suddenly a discount/premium appeared on Bitfinex. However, that discount was getting smaller everyday and almost disappeared (until a bit earlier but still negligible in the volatile crypto market).
I personally hold a significant amount of USDT/Finex Dollars and not worried. I think the price is more relevant than the news. The probabilities or lack of funds will be builtin in the price. And the current price suggests that iFinex has got its shit together.
[+] [-] oooshha|7 years ago|reply
[+] [-] paulgb|7 years ago|reply
Or, it could mean that they keep buying up coins on the market at face value to keep prices stable to avoid a run on the bank (which they can only do as long as their reserves remain).
[+] [-] ionionaisodgni|7 years ago|reply
[+] [-] Havoc|7 years ago|reply
Only true if the price is pure market driven, not manipulated by a powerful player. Like say...idk Bitfinex.
>I personally hold a significant amount of USDT/Finex Dollars and not worried.
I'd be panicking, but to each their own
[+] [-] empath75|7 years ago|reply
[+] [-] unknown|7 years ago|reply
[deleted]
[+] [-] 6nf|7 years ago|reply
Why do you do it?
[+] [-] conanbatt|7 years ago|reply
[+] [-] magnamerc|7 years ago|reply
[+] [-] blake1|7 years ago|reply
And I honestly am surprised how pedestrian the fraud was. It sounds like they had the cash to back tether and just flat out stole it to cover for a trading loss. This has happened countless times before.
[+] [-] impostervt|7 years ago|reply
[+] [-] ronsor|7 years ago|reply
[+] [-] hendzen|7 years ago|reply
[+] [-] LandoCalrissian|7 years ago|reply
[+] [-] tim333|7 years ago|reply
[+] [-] Animats|7 years ago|reply
[+] [-] tim333|7 years ago|reply
[+] [-] stefan_|7 years ago|reply
[+] [-] FireBeyond|7 years ago|reply
[+] [-] jpmattia|7 years ago|reply
For all the noise about Tether being insolvent, it turns out that it was completely solvent? Then in 2018, Bitfinex got taken by Crypto Capital and raided the Tether reserves for $850M backing the Tether issuance?
So if I'm reading this right: The holders of tether are now screwed and should be converting to bitcoin/litecoin/etc asap.
[+] [-] bravoetch|7 years ago|reply
[+] [-] shiado|7 years ago|reply
[+] [-] miguelmota|7 years ago|reply
[+] [-] shrimpx|7 years ago|reply
[+] [-] village-idiot|7 years ago|reply