Leaked Report to Shareholders Renews Concerns Surrounding Bitfinex

All eyes have been on Bitfinex in recent days, with the exchange experiencing dramatic flash crashes on select altcoin markets after having been the subject of a distributed denial-of-service (DDoS) attack last week. A quarterly shareholder update from the company has also been leaked, evidencing that Bitfinex is one of the major institutions purchasing USDT from Tether – intensifying the controversy and scrutiny surrounding the relationship between the two companies.

Also Read: Bitfinex Slaps a Lawsuit on Its Nemesis as the Tether Squabble Gets Ugly

NEO, ETP, and OMG Experience Severe Flash-Crashes on Bitfinex

On the 29th of November, several altcoin markets witnessed extreme flash-crashes on the Bitfinex markets. Metaverse (ETP) lost more than 98% of its USD value in a single 1-minute candle. ETP immediately recovered from the crash, however, it quickly showed more signs of weakness, eventually leading to a secondary flash-crash that saw metaverse lose more than 60% of its value in less than ten minutes. NEO experienced a similar crash, losing almost 90% of its value in less than five minutes, whilst OMG lost over 60% of its value in under five minutes.

Although most of the markets have since recovered, many margin traders have complained that they were liquidated as a consequence of the sudden price movements. Brett Kruger, a customer of the exchange, told media that the exchange was “lagging” and “unresponsive” during the flash-crashes – asserting that the technical difficulties left traders unable to react and manage their positions once the crash began, in some cases resulting to stop orders being executed at prices significantly lower than those set by the user.

The crashes occurred just a couple of days after the exchange suffered a DDoS attack. The attack caused Bitfinex to go offline for less than an hour, sparking a brief dip in the price of bitcoin to below $11,000 USD. At the time of the attack, the exchange went offline before tweeting “The cause is a DDoS attack. A person or group is intentionally trying to cause the platform to not operate normally.”

A Leaked Quarterly Update Has Evidenced That Bitfinex Is Purchasing USDT From Tether

The recently leaked quarterly report for Bitfinex shareholders has intensified the scrutiny surrounding Bitfinex and Tether. The report states that “Since April, the vast majority of all Tether issuances have been occurring through Bitfinex […] Because Bitfinex and Tether have common principles and banking, there is no limit to the timing or amount of money that can flow between the two entities even if inbound and outbound customer wires are limited. Bitfinex holds the vast majority of its customer USD balances in the form of USD bank balances. Bitfinex typically only holds less than 20M Tethers for customer withdrawal. When that balance approaches zero, Bitfinex moves money (typically $20M) from the Bitfinex bank account to the Tether bank account at the same bank in order to purchase additional tether from Tether Limited. To be clear, when this happens, cash is credited (or removed) from Bitfinex’s balance sheet and debited (or added) to Tether’s.”

The report asserts that the reason behind “the continuing creation of Tethers is […] demand from verified customers,” adding that “Bitfinex simply acts as an aggregator of customer demands for bulk creation and acquisition of Tethers.” The report claims that the creation of USDT “has nothing to do with the USD lending market” – addressing speculation that many of the Tethers recently produced have been used to fund margin trading on the exchange. However, with the company still failing to provide evidence of their associated banking partners, going as far as agreeing to provide such information to a reporter on the condition that they sign a non-disclosure agreement, many traders have continued to express skepticism regarding the operations of Bitfinex and Tether.

Lastly, an exhumed Bitcointalk thread from 2014 in which Giancarlo Devasini, widely considered to be Bitfinex’s chief financial officer, called an aggrieved customer a “retarded prick” and publicly disclosed their account balance, has circulated recently. In the same thread, Mr. Devasini also responds to a question asking if Bitfinex can develop a “bot [… to] take [bitcoin] to 10,000?” by stating “Currently working on it… :-P” – calling into question the professionalism of the conduct displayed by the exchange’s top representatives.

What is your opinion on the recent controversy surrounding Bitfinex and Tether? Share your thoughts in the comments section below!

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