This is a big one folks. .Remember when we talked about the fears that there was no way the folks behind Tether (iFinex) could realistically peg it to the US dollar (so every Tether bought would be backed by 1 USD)? And remember that they wouldn’t offer up a public audit providing evidence that the reserves were actually there?
Well, the NY AG is suggesting that Bitfinex was using Tether’s reserve monies (client and corporate funds), to cover up the loss of $850M on the Bitfinex side.
Bitcoin prices have reacted a bit, down 3-8% in the last 24 hours across all major exchanges.
iFenex, who runs the Bitfinex exchange and also Tether, is refuting the charges of fraud, of course.
The important bits, related to the loss of funds
Bitfinex, unable to find a bank that would work with it, entrusted more than $1 billion in co-mingled client and corporate deposits last year to a Panamanian firm, Crypto Capital Corp., according to the civil case brought by New York Attorney General Letitia James, a Democrat who took office in January. Bitfinex was allegedly using that firm as an intermediary to wire dollars to traders.
Despite the sheer amount of money it handed over, Bitfinex never signed a contract or other agreement with Crypto Capital,” the attorney general wrote to the court. By mid- to late-2018, executives at Bitfinex and Tether suspected Crypto Capital had lost, stolen or absconded with the money, and they haven’t be able to find or recover roughly $850 million, she said. “None of that has been disclosed to investors
I have a few Cardano coins (ADA) which I hold off-line in a secure drive.
The only time I open that wallet is when I transfer bought coins into it.
I know it is a different issue to the topic here, but we need to be very vigilant with all of our dealings with Crypto coins.
This is new to many of us and the risks are enormous.
Already many millions of dollars have been stolen in hacking attacks.
There are approximately 4 million BTC “missing” from the count.
No one knows where they are because they have been stolen.
That begs the question: are they included in the count of 17,495,850 or not?
Are there really 21+ million BTC or 13+ million BTC?
And is the loss of these coins reflected in the current price of BTC?
As I am not a trader, but a buy-and-hold with these for the long haul, this question needs to be answered.
Having 4 million coins out of the currently quoted 17+ million represents nearly 23% of the supply.
I would be a bit nervous if I paid current prices for BTC and soon found out my holdings are actually going to take a 23% haircut.
But getting back on topic - the mind boggles that Bitfinex could actually hand over $850mil to a Panama (dodgy) company without a contract or any sort of paper trail.
This reeks of back-room deals and insider crime.
I guess I will leave it to others to speculate, but when the movie comes out, the “Wolf of Wall Street” will look like a child’s bedtime story!
I find it remarkable that Tether is holding its price, despite this scandal.
Maybe I have missed something.
Yes, interesting and complex question to answer. Joseph Young, a crypto analyst and primarily a writer, wrote about this very question last year.
His article quotes the number of lost and stolen BTC at closer to 6 million, meaning supply is even lower than you said. So that leaves 11 million BTC in circulation. The missing BTC is something that I think many are not aware of, and begs the question, is that lose factored in our not.
Here’s an interesting read on the 21 million coin cap of BTC. Doesn’t answer the “why” question directly, but does offer a great discussion.
And I forgot, yes, there is still another story here that we don’t fully know. Why hand over that staggering amount of client money to anyone for any reason, with no recourse to get it back, even if you had a legitimate reason, made in the interests of your clients.
Excellent article on the why, when, and who’s involved. It reads like an international crime drama book, involving the US, Poland, maybe Portugal, the UK, connections to Arizona and the Minnesota Vikings, probably corrupt US and Israeli businessmen, wire fraud, the FBI… just wow.
This is a really big news but are you not surprised that there is ABSOLUTELY no consequence on the market right now?I was expecting everything to go down and it’s like we are entering a new bull market. Nobody seem to care. Do you think Tether could go to zero?
It has already been proved that tether is backed by 0.74$ only but there is no effect on the price whatsoever. So maybe it has become too big to fail already as all exchanges are using it and depend on it.