Cryptocurrency exchange Bitfinex is in some scalding hot water.
Trouble for Bitfinex?
The Attorney General of New York Letitia James is accusing the exchange and the stable currency Tether of potentially hiding an $850 million theft that occurred somewhere between March 2017 and March 2018. James says that the money stolen consisted of both “co-mingled client and corporate funds,” and thus constituted losses for both individuals and institutional players.
The disappearance of the coins is also being tied to a transfer that occurred between Bitfinex and Crypto Capital Corp., a payment processing company in Panama.
Bitfinex is offering its own statement, assuring customers that the money was not lost or stolen. The statement reads:
The New York Attorney General’s court filings were written in bad faith and are riddled with false assertions, including as to a purported $850 million ‘loss’ at Crypto Capital. On the contrary, we have been informed that these Crypto Capital amounts are not lost but have been, in fact, seized and safeguarded.
The company says that it plans to fight any actions the New York Attorney General’s office plans to take. It also says that both itself and Tether are “financially strong,” and have the reserves and security protocols necessary to ensure the safety of all customers.
If the money is lost or stolen, it would be one of the largest – if not the largest – case of its kind in the crypto space. Prior, the records were held by cryptocurrency exchange Coincheck in first place, and Mt. Gox in second. Both platforms exist primarily in Japan, a country known for its strict regulation of cryptocurrencies but for employing hot wallet over cold wallet strategies, leaving customer funds relatively unprotected by comparison.
The Mt. Gox theft occurred in February of 2014 and resulted in over $400 million in bitcoin funds disappearing overnight. Many of the stolen and lost funds have not yet been returned, though the company is making efforts to issue reimbursements to affected clients.
This Happens Too Often
Coincheck occurred roughly four year later in January 2018. This time, over $500 million in assorted crypto funds were stolen from the exchange. The incident was considered such an embarrassment that the country’s Financial Services Agency (FSA) was persuaded to get involved in Japan’s crypto space. It was here that strict regulation began, and the FSA began sending threatening letters to all neighboring exchanges that didn’t meet security standards. The time had come to either shape up or ship out.
The Attorney General’s office is claiming that Bitfinex was forced to dip into Tether’s cash reserves following the disappearance of the money. They also alleged that Crypto Capital Corp. issued a complaint to Bitfinex saying that the funds in question were seized by government authorities “in Portugal, Poland and the United States.”