By CCN.com: According to a statement released by Dong Zhao on Weibo, a billionaire investor in Bitfinex and a widely recognized trader, bitcoin exchange Bitfinex is planning to create an exchange-based token following the Tether scandal.
Some local sources have said that investors in Asia have shown interest in the exchange token proposal made by Zhao, with one miner based in China suggesting that investors have already pledged $300 million in Tether.
While the $300 million figure is unconfirmed and it remains uncertain whether Bitfinex is currently garnering investors, the crypto market, especially the Asian market, was generally said to have been unphased by the Tether controversy.
“The market just doesn’t care. This community has an immense tolerance for pain,” one crypto trader asking for anonymity due to the sensitivity of the subject told the WSJ.
In 2016, after suffering a high-profile security breach that led to the loss of user funds, Bitfinex released BFX tokens. The tokens represented shares in iFinex Inc., the parent company of Bitfinex and Tether Inc.
In April 2017, Bitfinex said in a statement that it redeemed 100 percent of outstanding BFX tokens, compensating all users who were affected by the hack.
“Bitfinex is pleased to announce that we will shortly be redeeming 100% of all currently issued and outstanding BFX tokens. This will be the final redemption of BFX tokens created in August 2016. After these redemptions, no BFX tokens will remain outstanding; they will all be destroyed,” Bitfinex said at the time.
In essence, Bitfinex is planning to secure funding for the capital it allegedly lost amidst its dealings with Crypto Capital Corp, a Panama-based “bank” with the same method it raised funding in 2016 to deal with its $72 million hacking attack in 2016.
On April 25, the office of the New York Attorney General Letitia James filed a lawsuit against iFinex for allegedly co-mingling client funds and mismanaging the cash reserves of Tether, a stablecoin that represents the value of the U.S. dollar.
The Attorney General alleged Bitfinex of losing $850 million it sent to Crypto Capital Corp to process funds on behalf of the company, which the firm failed to recoup. Bitfinex is said to have granted itself access to $900 million of Tether’s reserves, a move the Attorney General described as a cover-up.
“In order to fill the gap, executives of Bitfinex and Tether engaged in a series of conflicted corporate transactions whereby Bitfinex gave itself access to up to $900 million of Tether’s cash reserves, which Tether for years repeatedly told investors fully backed the tether virtual currency ‘1-to-1,’” the official document released by the Attorney General’s office read.
If successful, the token would allow Bitfinex to secure $900 million from investors willing to take equity in iFinex in exchange for USDT, which then would allow iFinex to refill the $900 million it allegedly received from Tether Inc.
Zhao said speaking to CoinDesk:
Exchange tokens have better liquidity. They are the only real token that is not a shitcoin. The issuance method could be similar to that of other exchange tokens, which were distributed through pre-paid trading fee packages.
CnLedger, a respected news source for the Chinese crypto industry, told CCN that Zhao has a “considerable” reputation in China and as such it is highly unlikely for Zhao to release false information about the Bitfinex token offering.
CnLedger told CCN:
“Zhaodong was an early bitcoin adopter in China, with a considerable reputation. Therefore it is unlikely for him to publish fake news about Bitfinex. In the mean time, he claims to be a shareholder of the exchange, so saying things that will help defend the interest of Bitfinex is expected.”
Last modified: April 30, 2019 08:02 UTC