What does the Canadian exchange QuadrigaCX, which lost $190 million in user funds, and Bitfinex, which has $850 million in mystery, have something in common? They all rely on a mysterious Panamanian “bank” Crypto Capital to handle the payment process.
In the event of Bitfinex, the cooperation with Crypto Capital became a disaster. This week, the Attorney General of New York accused Bitfinex and iFinex, the parent company of the stable currency company Tether, of deceiving investors. iFinex is alleged to use Tether's reserves to cover $850 million in user and corporate capital losses. This part of the funds has been transferred to Crypto Capital, but it is reported that government officials in Portugal, Poland and the United States have confiscated the money.
In this regard, Bitfinex said:
These funds at Crypto Capital have not been lost, but have actually been seized and protected. We have been actively working to exercise our rights and take remedial measures so that these funds can be released.
Crypto Capital exists to fill vacancies in cryptocurrency companies' banking operations, and many banks are reluctant to serve such companies due to concerns about money laundering. Only a small number of companies – such as Coinbase – can open accounts at mainstream banks such as Barclays. Most companies can only choose banking service providers like Crypto Capital or Noble Bank.
According to Wei Zhou, chief financial officer of Coin, and Christina Lee, chief brand officer of Kraken, they also worked with Crypto Capital.
Crypto Capital has not yet commented on the Bitfinex event.
The parent company of Crypto Capital is Global Trade Solutions AG, a financial institution that has obtained a license in Zug, Switzerland. It is also a bank supplier to the Canadian exchange QuadrigaCX. QuadrigaCX is now filing for bankruptcy due to the loss of $190 million in assets.
Curiously, QuadrigaCX is still one of its main partners on Crypto Capital's website. Just before the exchange took place, Alex Hanin, chief architect of QuadrigaCX, said on Reddit that the transactions handled by the company were unsuccessful due to problems with Crypto Capital's bank in Taiwan.
In addition, another cooperative exchange listed by Crypto Capital is Coinapult. However, Coinapult is also very difficult to provide basic services. According to the company's website, the company has been unable to provide bitcoin trading services since December last year. Coinapult's last tweet was in May 2017. These are not good signs.
Over the years, Crypto Capital has been receiving customer complaints, including withdrawals and deposit delays. A number of posts on Reddit, the Bitcointalk forum and the media all reported on Crypto Capital's payment processing issues. But almost no one has received a response from the company.
There are even reports that last year the Polish authorities seized 1.27 billion zlotys ($371 million) from two companies suspected of money laundering, all of which are subsidiaries of Crypto Capital. Bitfinex said it thought the reports were incorrect.
So, how does Crypto Capital solve the banking problems of cryptocurrency companies? According to Trustnodes, the Panamanian bank did not disclose its partnership with the cryptocurrency exchange, but opened a bank account in the name of a shell company that sounded harmless. The article lists the location of each bank that opens accounts in the United States and Portugal.
HSBC is also involved. In October last year, The Block reported that Crypto Capital provided its users with HSBC bank accounts, and its reporter Larry Cermak wrote on Twitter: “Bitfinex conducts business at HSBC through a private account called Global Trading Solutions.” It does look like the use of shell companies as described by Trustnodes.
It seems that Crypto Capital's accounts in many banks seem to have been closed. In a letter sent to partners in December last year, the company said that “Global Trade Solutions AG and related entities’ banking services in the United States, Europe and other specific locations were rejected.” The reason is that government agencies investigate money laundering. And other financial criminal activities.
The letter said that its HSBC bank accounts in London, the US and Portugal accounts were frozen.
Despite this, Crypto Capital assured its partners that it would soon resume normal service, which would take only two or three months. But that was four months ago.