Bitcoin (BTC) Hits $5,200 As Tether News Propagates, Traders Flee Bitfinex
As Ethereum World News reported, iFinex, the operator of both Bitfinex and Tether Limited (the firm behind USDT), had come under legal pressure from a key U.S. legal entity. For those who missed the memo, here’s a recap:
A document unveiled by the New York Attorney General’s (NYAG) office on Thursday has revealed that iFinex, the company behind both Tether (USDT) and Bitcoin exchange Bitfinex, is being sued. Per a lawsuit issued by official Letitia James, iFinex Inc, which is the company behind the two aforementioned crypto startups, promoted the “issuance, distribution, exchange, advertisement, negotiation, purchase, investment advice, or sale of securities” in New York State, which is illegal without the proper licensing and documentation.
The suit has also revealed that Bitfinex purportedly sent $850 million to a Panama-based company, failed to secure the funds later, and went on to raid almost $1 billion of Tether’s cash reserves to satisfy its customers. Within 30 minutes of the news’ publishing, BTC dropped from $5,550 on Coinbase to a low of $4,950 — a collapse of just over 10% — as Crypto Twitter spread this harrowing pieces of news within minutes. As researcher Hasu notes, the fact that Bitfinex dipped into Tether’s reserves effectively verifies that USDT is actually backed, and that the exchange was just employing bad business practices and/or was unlucky with its Panama-based payment processor/partner.
Bitfinex Responds, But Traders Flee In Horror Anyway
About an hour after this news hit the Wall Street Journal and other outlets, a Bitfinex staffer going by “Garbis” released a statement on the company’s official Reddit forum. The employee explained that Bitfinex’s “team is reviewing the documentation,” and a statement will be released on the matter in the coming hours. Many others in the community made similar remarks, posting images of their withdrawal requests — balances and addresses redacted of course — to show that they are now skeptical of Bitfinex’s dealings.
