Duplicitous statements and secretive money transfers by a long-troubled bitcoin exchange could put the broader cryptocurrency markets in serious jeopardy.
Last week, New York Attorney General Letitia James announced that iFinex—the parent company of Bitfinex, an exchange, and Tether, a dollar-backed digital token—is under investigation for fraud. At issue is $850 million that disappeared from Bitfinex’s coffers in mid-2018. The funds may have been stolen while in the possession of Crypto Capital, a payments processing company based in Panama. Crypto Capital has also been tied to Quadriga, a Canadian exchange which lost $140 million a few months ago.
To continue processing customer withdrawals after its funds vanished last fall, Bitfinex allegedly dipped into cash reserves that are meant to back Tether, a move made possible because Bitfinex and Tether share a management team. According to court filings, Bitfinex quietly moved $700 million from Tether’s reserves to the exchange’s own bank accounts. The New York attorney general has ordered iFinex to cease further transfers. iFinex did not reply to a request for a comment.