NY Attorney General sues Bitfinex

[Baofeng]

The New York State Attorney General (NYSAG) is suing Bitfinex, the cryptocurrency exchange, and affiliated firm Tether, the company behind the stablecoin of the same name.

https://finance.yahoo.com/news/ny-attorney-general-sues-bitfinex-210643545.html

Here is the affirmation document:

https://iapps.courts.state.ny.us/fbem/DocumentDisplayServlet?documentId=vIexA1b0spKOnK_PLUS_ZUGTJ3A==&system=prod

Bitfinex official response from the allegation, here.

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[PrimeNumber7]

The NYAG say Bitfinex believes the cash was stolen. Bitfinex in their statement say "we have been informed that these Crypto Capital amounts are not lost but have been, in fact, seized and safeguarded". These two statements conflict with one another.

At the end of the day, if Bitfinex does not get this money back, I don't believe they will be an ongoing concern. They made an estimated $6 million in the past 30 days in operating profits, but half that will need to go to interest for the Line of Credit. At this rate, it will be years before the losses are recuperated.

[Pab]

There is not criminal case yet
Case like that on court can take years
But for sure it will be used to influence bitcoin price
We had now kind of chaos. Traders are mostly removing his coins from finex
And moving from Tether to fiat or other stable coins

There is also yet another case at New York court that time against JP Morgan Chase
very interesting to read


https://www.ccn.com/federal-judge-rule-crypto-is-cash-chase-bank-lawsuit

https://youtu.be/cwDVjIRkklU

[dothebeats]

The NYAG say Bitfinex believes the cash was stolen. Bitfinex in their statement say "we have been informed that these Crypto Capital amounts are not lost but have been, in fact, seized and safeguarded". These two statements conflict with one another.

At the end of the day, if Bitfinex does not get this money back, I don't believe they will be an ongoing concern. They made an estimated $6 million in the past 30 days in operating profits, but half that will need to go to interest for the Line of Credit. At this rate, it will be years before the losses are recuperated.

The statements released by the AG and Bitfinex are indeed of conflicting nature, yet I for one thinks that Bitfinex is on the wrong here due to the nature of its relationship with Crypto Capital. No contracts whatsoever are binding their relationship with each other, and one party, Crypto Capital, can just run away with the money and Bitfinex can't do something about it. As for operations, many traders have already been pulling out assets from the exchange in question, and could potentially lead to its closure just months after this case was filed.

Poor finex, but they had it coming anyway.

[malevolent]

The NYAG say Bitfinex believes the cash was stolen. Bitfinex in their statement say "we have been informed that these Crypto Capital amounts are not lost but have been, in fact, seized and safeguarded". These two statements conflict with one another.

$370M of the missing money has been frozen by Polish authorities last year, due to someone using either Bitfinex or Crypto Capital to launder drug money. So technically that part of the money hasn't been 'lost', but seeing how long and drawn-out legal cases can become, years can pass before the funds will be returned.

[Pab]

The NYAG say Bitfinex believes the cash was stolen. Bitfinex in their statement say "we have been informed that these Crypto Capital amounts are not lost but have been, in fact, seized and safeguarded". These two statements conflict with one another.

$370M of the missing money has been frozen by Polish authorities last year, due to someone using either Bitfinex or Crypto Capital to launder drug money. So technically that part of the money hasn't been 'lost', but seeing how long and drawn-out legal cases can become, years can pass before the funds will be returned.

CryptoCapital was laundering Colombian cartel money
Strange is that it was maybe still is 800 mln $
USA didn't blacklisted his offshore like Europe did
There was a lot of information released by Paradise Papers about Crypto Capital Polish Bank and Bitfinex
It is enough for US authorities to look there and ask journalists
But USA is keeping his offshore because his banks need them

[PrimeNumber7]

The NYAG say Bitfinex believes the cash was stolen. Bitfinex in their statement say "we have been informed that these Crypto Capital amounts are not lost but have been, in fact, seized and safeguarded". These two statements conflict with one another.

$370M of the missing money has been frozen by Polish authorities last year, due to someone using either Bitfinex or Crypto Capital to launder drug money. So technically that part of the money hasn't been 'lost', but seeing how long and drawn-out legal cases can become, years can pass before the funds will be returned.

I found two articles to be about what I presume you are referring to.

Bitfinex had to borrow $700M from tether, out of the $850M that is unaccounted for. It would not be unreasonable to say Bitfinex had $150M in reserves.

If the $370M is in fact part of the $850M, Bitfinex's ability to recover the money will depend largely on if they were properly served with the seizure notice, and what they did to that customer's account.

Worse case scenario, if Bitfinex was properly served, but they eventually successfully processed a withdrawal for the customer despite the seizure notice, they will be on the hook for the entire $370M, and this money is in fact gone. If the customer for example withdrew bitcoin, deposited the bitcoin to binance for example, and binance properly froze access to the money, Bitfinex *might* be able to get the $370M back, but I am not an expert in this area, and am not explicitly sure.

A best case scenario is Bitfinex froze this customer's account and the account is currently containing at least $370M. In this case, Bitfinex could simply administratively debit the customer's account to cover the difference, and the customer could try to recover the money from Poland themselves if they have a legitimate claim to it.

If Bitfinex was not properly served with a seizure notice, and let the customer withdraw, the case becomes more complicated, and potentially will be drawn out.

[figmentofmyass]

The NYAG say Bitfinex believes the cash was stolen. Bitfinex in their statement say "we have been informed that these Crypto Capital amounts are not lost but have been, in fact, seized and safeguarded". These two statements conflict with one another.

neither the NYAG nor bitfinex could actually confirm the $850m in crypto capital funds held on behalf of bitfinex was seized: https://bitcoinmagazine.com/articles/bitfinex-faces-legal-action-from-ny-attorney-general-heres-what-this-means/

so we're not really sure if it was stolen or seized. in the end, it doesn't really matter and bitfinex is clearly spinning things. the important fact is that bitfinex lost access to $850m, couldn't process its customer fiat withdrawals, and dipped into tether funds to cover the shortfall. depending on other assets held by bitfinex/tether, they may not be insolvent. but this certainly suggests they are.

[countryfree]

Yes, Bitfinex isn't saying enough, or isn't saying the truth. It says 850 millions have been seized, and that is certainly possible, but in that case, it means there are legal proceedings which could prove the seizure. Only thieves seize money without traces.

[Pab]

The NYAG say Bitfinex believes the cash was stolen. Bitfinex in their statement say "we have been informed that these Crypto Capital amounts are not lost but have been, in fact, seized and safeguarded". These two statements conflict with one another.

$370M of the missing money has been frozen by Polish authorities last year, due to someone using either Bitfinex or Crypto Capital to launder drug money. So technically that part of the money hasn't been 'lost', but seeing how long and drawn-out legal cases can become, years can pass before the funds will be returned.

I found two articles to be about what I presume you are referring to.

Bitfinex had to borrow $700M from tether, out of the $850M that is unaccounted for. It would not be unreasonable to say Bitfinex had $150M in reserves.

If the $370M is in fact part of the $850M, Bitfinex's ability to recover the money will depend largely on if they were properly served with the seizure notice, and what they did to that customer's account.

Worse case scenario, if Bitfinex was properly served, but they eventually successfully processed a withdrawal for the customer despite the seizure notice, they will be on the hook for the entire $370M, and this money is in fact gone. If the customer for example withdrew bitcoin, deposited the bitcoin to binance for example, and binance properly froze access to the money, Bitfinex *might* be able to get the $370M back, but I am not an expert in this area, and am not explicitly sure.

A best case scenario is Bitfinex froze this customer's account and the account is currently containing at least $370M. In this case, Bitfinex could simply administratively debit the customer's account to cover the difference, and the customer could try to recover the money from Poland themselves if they have a legitimate claim to it.

If Bitfinex was not properly served with a seizure notice, and let the customer withdraw, the case becomes more complicated, and potentially will be drawn out.

Bitfinex never had account in polish bank.They have account through Crypto Capital
but that account has been frozen because of cartel  ML discovered
So maybe here is that lost. Crypto Capital money on Polish bank frozen by Polish FBI

[squatter]

Yes, Bitfinex isn't saying enough, or isn't saying the truth. It says 850 millions have been seized, and that is certainly possible, but in that case, it means there are legal proceedings which could prove the seizure. Only thieves seize money without traces.

There is surprisingly little public documentation of the Polish seizure. The only primary sources are Polish-language and contain very few details. Further, it is only speculation that the Polish shell company in question was controlled by Crypto Capital and that the money (or some of it) belonged to Bitfinex.

It's clear, however, that Crypto Capital and the exchanges it serves -- Cex.io, Bitfinex, Coinapult, etc. -- have been facing worse and worse withdrawal delays over the past year. It's not just Bitfinex or Tether. There may exist legal proceedings that could prove various bank seizures, but if we're talking about shell companies in foreign jurisdictions, it may be hard for us average joes to connect the dots.

[countryfree]

So it's possible Bitfinex hasn't done anything wrong, with Crypto Capital the only culprit? Hmmm...

I hope that would be the case, but we were talking of 850 millions, and there's only 370 which may have been seized in Poland, so what about the remaining 480 millions?

If Bitfinex wants to stay in business, it has a lot to explain. With all details given to the court in NY, so it will take more than a blog post...

[LeGaulois]

Bitfinex said previously that the funds are currently seized and now it can't confirm?. They're saying different version to different people.  If there has indeed been a seizure, it is due to a court decision. In any case, there is probably a legal notification. Why is it so complicated to present it so that it can clear things up once and for all? What is the version for Crypto Capital for this ?

[CryptoBry]

The NYAG say Bitfinex believes the cash was stolen. Bitfinex in their statement say "we have been informed that these Crypto Capital amounts are not lost but have been, in fact, seized and safeguarded". These two statements conflict with one another.

At the end of the day, if Bitfinex does not get this money back, I don't believe they will be an ongoing concern. They made an estimated $6 million in the past 30 days in operating profits, but half that will need to go to interest for the Line of Credit. At this rate, it will be years before the losses are recuperated.

The statements released by the AG and Bitfinex are indeed of conflicting nature, yet I for one thinks that Bitfinex is on the wrong here due to the nature of its relationship with Crypto Capital. No contracts whatsoever are binding their relationship with each other, and one party, Crypto Capital, can just run away with the money and Bitfinex can't do something about it. As for operations, many traders have already been pulling out assets from the exchange in question, and could potentially lead to its closure just months after this case was filed.

Poor finex, but they had it coming anyway.

This can have debilitating effects on Bitfinex as we know that people are always afraid of any business that experienced highly-publicized case on the court. Bitfinex remains to be a big player in the cryptocurrency exchange sphere and I am still hoping they can be able to overcome this one, learned from the lessons here and move on to continue being a big leader of the industry.

[PrimeNumber7]

The NYAG say Bitfinex believes the cash was stolen. Bitfinex in their statement say "we have been informed that these Crypto Capital amounts are not lost but have been, in fact, seized and safeguarded". These two statements conflict with one another.

neither the NYAG nor bitfinex could actually confirm the $850m in crypto capital funds held on behalf of bitfinex was seized: https://bitcoinmagazine.com/articles/bitfinex-faces-legal-action-from-ny-attorney-general-heres-what-this-means/

so we're not really sure if it was stolen or seized. in the end, it doesn't really matter and bitfinex is clearly spinning things. the important fact is that bitfinex lost access to $850m, couldn't process its customer fiat withdrawals, and dipped into tether funds to cover the shortfall. depending on other assets held by bitfinex/tether, they may not be insolvent. but this certainly suggests they are.

Bitfinex took a loan from tether for the amount of the money that is inaccessible, so they can process customer withdrawals.

I don't think bitfinex has $850M+ in reserves because they have a practice of paying most of their operating earnings to shareholders. They invested in a small number of altcoins, IOTA being most notable, but altcoins have performed very poorly, and I don't know how much these investments will help.

Based on the above, I don't think bitfinex is solvent. I am comfortable saying I believe they can pay out all customer deposits because of the loan from tether.

So it's possible Bitfinex hasn't done anything wrong, with Crypto Capital the only culprit? Hmmm...

Bitfinex does not currently have access to $850M worth of USD. Some of this money is customer deposits, and bitfinex did not disclose this to the public until the NYAG disclosed this fact for them.

The failing to disclose the missing USD is probably something most of their customers will frown upon.

[countryfree]

So it's possible Bitfinex hasn't done anything wrong, with Crypto Capital the only culprit? Hmmm...

Bitfinex does not currently have access to $850M worth of USD. Some of this money is customer deposits, and bitfinex did not disclose this to the public until the NYAG disclosed this fact for them.

The failing to disclose the missing USD is probably something most of their customers will frown upon.

Their saying that they will get the money back within a few weeks is also overpromising.

[PrimeNumber7]

So it's possible Bitfinex hasn't done anything wrong, with Crypto Capital the only culprit? Hmmm...

Bitfinex does not currently have access to $850M worth of USD. Some of this money is customer deposits, and bitfinex did not disclose this to the public until the NYAG disclosed this fact for them.

The failing to disclose the missing USD is probably something most of their customers will frown upon.

Their saying that they will get the money back within a few weeks is also overpromising.

I agree, their promise to a large shareholder that they will recover the money in a couple of weeks is probably not realistic. 

I think they might have held off on starting litigation out of not wanting the issue to be public. With the NYAG changing these circumstances, they no longer have that problem.

[gentlemand]

https://www.coindesk.com/tether-lawyer-confirms-stablecoin-74-percent-backed-by-cash-and-equivalents

'Tether’s reserves of cash and cash equivalents alone (without the line of credit) would cover approximately 74 percent of the outstanding amount of tether.'

I wonder how this will be digested. My guess is no one's going to care just like 'real' fiat.

[malevolent]

I think they might have held off on starting litigation out of not wanting the issue to be public. With the NYAG changing these circumstances, they no longer have that problem.

Polish authorities have frozen a portion of the money a year ago already, with no progress in sight (or they would have likely shared some information), so they will totes get the money back, within two weeks™.

[gentlemand]

https://www.coindesk.com/two-charged-with-running-shadow-banking-service-for-crypto-exchanges

A bit more fun here. Not part of this specific case but it's more Bitfinex overspill. My feeling is that they're going to keep peeling back ever more juicy layers until the big poo at the centre is revealed. Then it attacks.