Bitfinex and USDT stable currency puzzle

New York prosecutors issue funds misappropriation charges

On Thursday, the New York State Attorney General said Bitfinex, a digital asset exchange that claimed that USDT had real dollar support, had misappropriated USDT deposits to cover up the $850 million in lost funds.

New York State Attorney General Letitia James said that Hong Kong-based iFinex Inc. (the operator of the Bitfinex exchange and also the parent company of Tether) has been mixing customers and company funds to cover up lost funds. The loss of funds occurred in mid-2018 and has not been publicly disclosed.

The Attorney General's Office stated that it had obtained a court authorization to stop iFinex from transferring USDT deposits to Bitfinex's bank account, terminating any dividends and other benefits distribution to management, and handing over relevant documents and information.

According to the Office of the Attorney General, the cover-up incident has diverted at least $700 million from USDT deposits.

David Miller, who works at Morgan Lewis in New York, is a defense attorney for the above-mentioned affiliates. He declined to comment on this. Bitfinex immediately issued a fierce announcement, saying that the relevant ban of the Attorney General of New York is "malicious writing", full of "false assertions", will strive to exercise rights and remedies, release funds, insisting that "the financial status of Bitfinex and Tether are both well".

It is reported that since 2018, the US Department of Justice has launched a survey of crypto-equity exchanges. This astounding message is one of the results of this survey. A September report sent an early warning to investors that many exchanges lack basic safeguards that make consumers vulnerable to exploitation by market operators.

"Stabilizing a coin" USDT has been repeatedly questioned

As a stable currency, Tether is anchored to the dollar. However, the company has never published any complete audit report showing that it has reserves to support the USDT in circulation, leading the public to question whether these funds actually exist.

Tethe has built its momentum in the market with both the security of the dollar and the speed and anonymity of the digital currency. Its market value has steadily increased over the past two years, from approximately $10 million at the beginning of 2017 to $2.8 billion, and has now become a major source of liquidity in the crypto-asset market. According to research site CryptoCompare, approximately 80% of BTC transactions are completed in Tether.

The US Department of Justice said that Bitfinex's problems began in 2018 when it provided $850 million to third-party payment processor Crypto Capital Corp. to process customer withdrawal requests. However, follow-up, Panama-based Crypto Capital failed to process these orders. The representative of Crypto Capital did not immediately comment on this.

People familiar with the matter said that as of November of that year, Bitfinex had determined that it had lost $850 million in funding. Later, in order to conceal the missing funds, Bitfinex and Tether carried out a series of operations, exhausting Tether's reserves.

The $850 million funding gap will account for the majority of Tether's reserves. Tether currently claims on the official website that its issued stable currency has clear reserve support, including currency, cash equivalents, other assets and receivables. The comparison shows that the statement here was changed in March, and the previously claimed reserve is 100% of the currency.

Tether is suspicious and difficult to distinguish between true and false

Looking back, the truth is confusing.

On October 25, 2018, Tether announced the destruction of 500 million USDTs, leaving only 446 million pieces for distribution. The industry generally believes that the destruction of the USDT incident is related to its previous plunge. From the market feedback, after the destruction operation, the USDT volume has not been significantly enlarged.

On March 14, 2019, the Tether official website deleted the statement that the token was completely supported by the US dollar, and the expression was changed to “reserves such as traditional currency and cash equivalents”. This means that the value of the token has been decoupled from the US dollar and does not constitute a one-to-one anchor relationship previously promised.

Starting at 11pm on April 24th, 2019, in just 12 hours, Tether issued nearly 420 million USDTs on the Omni, Ethereum and Wavefield platforms, valued at $420 million. Research analysis suggests that Tether (USDT) is used to manipulate the market. Accordingly, the US judicial department has increased its investigations.

As the stable currency competitors such as Circle, Gemini and Paxos continue to work, Tether's share of the stable currency market continues to decline.

Views of all parties

For today's New York prosecutor's allegations of misappropriation of Bitfinex funds, Encrypted Valley (WeChat public number: CryptoValley) collected opinions from all sectors of the industry for readers' reference. (The following remarks are cited by my author and are intended to provide readers with a holistic view, not representing the encrypted valley position.)

BlockVC Partner Xu Yingkai

“In the case of Tether reserves with redemption capacity, USDT in the case of a credit crisis, the biggest beneficiary is not BTC, but other so-called compliance endorsement of stable coins, such as GUSD or USDC. The possible guess is that behind the above stable coins The affiliates of the joint regulators, freezing the Tether assets in the name of seizure protection, and spreading the bad news of the USDT caused panic. This is a tactic that has been used since October 15, 2018, and explains why the BTC is still weak."

Coin founder Wang Lei

“USDT is equivalent to the corporate bond issued by Bitfinex and has the best liquidity in all stable currencies. But this does not mean that it is the US dollar. At this stage, there is no exchange to break the USDT, because 80% of the circulation in the market is completed through USDT. But if the New York General Inspections really hold on to the handle, there might be a head exchange that would do so, and then an earthquake. Bitfinex’s opponents are not only prosecutors, but also a stable currency (no one) and others. Currency exchange.

Bifinex has two times of stolen money in history, if it counts the current explosion (in mid-2018), a total of three times. The misappropriation of USDT to make up for the hole is only one aspect. Some people find that the stolen coins in 2016 were moved today, which means that they are suspected of being arrested. What do you think of it, the money is your own, it is best to put back your own wallet to avoid the limelight. For example, clear all your USDTs to BTC or French currency.

Weibo@chain circle observer

"Today, some people say that the stable currency USDT has gone wrong, and it is good for other stable coins. It is so fun. As the central consensus stable currency of the first consensus, you can’t rely on it. Do you still expect other stable coins? I also hope that the Chinese will be stable. currency?"


“USDT is sing by malicious people. This is a menstrual activity. It will come every two months. Don’t worry, in fact, you can't benefit too much from buying USDT at a low price.”


“Bitfinex and the Office of the Attorney General of New York are spitting each other. Only the leek is hurt. But there are a few things to prove from this: 1. Bitfinex is rich enough, whether it is USD or BTC, there is enough stock, although not It must be a 1:1 reserve, but there is still a long way to go before the USDT crash. 2.USDT as the currency circle FIAT, from the perspective of the currency transaction and the transaction amount, its status is difficult to shake, because the supervision is less and the liquidity is strong. It has the advantage that other stable coins are hard to match, and it will not collapse in a short time. 3. The people are suffering, the people are suffering, the gods fight, the leek is injured, don't operate."

– END –

Kevin Yang, Gigi Yip, Author of Circle Fang

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