Home / Bitcoin / The rumors of "Insolvenza", "Escape of banking partners" and suspension of Fiat deposits

The rumors of "Insolvenza", "Escape of banking partners" and suspension of Fiat deposits

On October 8th, Bitfinex, one of the Hong Kong-based exchanges, announced that it is not under immediate threat of insolvency and that related rumors are groundless and false. According to the press release of the company, all cryptocurrencies and fiat withdrawals are and have been processed as usual without the slightest interference.

After some clear clarifications, the tension in the crypto community is increasing – the spread between Bitcoin prices on Bitfinex and other exchanges, on October 15, reached $ 1,000 against the massive sale of Tether (USDT). Meanwhile, Bitfinex is testing its improved solutions, remains to be seen on the possible consequences for the crypto industry and must be confirmed that this is not a repeat of the story with Mt.Gox, to which some traders draw a parallel, but simply the implementation of a "new and increasingly robust fiat filing system".

Relations with banking partners

The transparency of the work on one of the main exchanges of cryptocurrencies has been questioned as early as October 2. The reason for this is the financial problems of the Noble Bank of Puerto Rico, which was allegedly committed to serving the operations of Bitfinex and Tether Ltd (The owners of Bitfinex are the beneficiaries of Tether). As reported, the bank has declared bankruptcy and is now looking for a buyer.

News on Noble Bank's financial problems were first published on September 30, 2018. The information came from an insider, who reported on the possibility of a quick liquidation of the bank if he did not receive the support of the owners of large quantities of Tether. The unpublished connection of the bank with Bitfinex accounts was revealed by BitMEX exchange researchers.

Bitfinex business structure

The cryptocurrency trading platform rejected this notion, stating in a Media post that "the stories and allegations currently in circulation, mentioning an entity called Noble Bank, have no impact [their] operations, survivability or solvency. "

One day before the aforementioned post, Larry Cermak, chief analyst at The Block, tweeted that Bitfinex had hired HSBC as a new banking partner:

Bitfinex has already faced challenges with banks. Thus, on 18 April 2017, the exchange suspended authorization withdrawals and reported that several Taiwanese banks, with which it cooperated, repeatedly blocked its transactions.

A cryptocurrency fund manager, Jacob Eliosoff, has suggested that these withdrawal problems could create new pressures in the digital money sector:

"This is a dynamic that many of us remember from Mt. Gox days when there were problems with fiat withdrawals, investors responded by converting the permits they had exchanged with Bitcoin so they could withdraw them. , raising the price on the exchange. "

Shortly before, in the second half of March, the US bank Wells Fargo & Co. suspended its services related to the processing of Bitfinex transactions. On April 5, the latter filed a lawsuit against the bank that was quickly abandoned.

The increase of the accusations

Su Medium, a user called Proof of Research, wrote a detailed article entitled "Bitfinex is No Longer Solvent – Remove Your Money Now" where he highlighted the difficulties in withdrawal problems that many users of the exchange had to face.

The article is no longer available publicly, because the user's account is now suspended. The blogger has reported complaints, published on Reddit, by users censored by the moderators of Bitfinex. Also, during the previous week, there were a series of complaints on poor customer service and the inability to interrupt the endless cycle of currencies borrowed on the platform. All of these reasons may have accelerated the rumors that Bitfinex has become insolvent.

Tether is in the mix

The worries about Tether are not new. Bitfinex has been accused by numerous media and industry representatives of not being transparent in the Tether audit, raising many concerns about the stablecoin 1: 1 peg. In particular, the cryptographic market depends on the Tether currency, which is the eighth largest cryptocurrency, with a market capitalization of $ 2.2 billion. Furthermore, there are many cryptographic exchanges such as OKEx, which depend on this cryptocurrency, since Tether is the second most traded cryptographic currency.

The last time Tether and Bitfinex demonstrated the existence of real fiat money behind their tokens, after the community had repeatedly expressed skepticism about bank audits and the source of funding. On June 20, Tether's general counsel, Stuart Hoegner, said that the number of USDT issued was $ 2.54 billion, which almost coincided with the numbers reported by Coinmarketcap.

However, this week marked a sharp decline for the price of the USD. During the Asian trading session on 15 October, before the opening of trading in Europe, Bitcoin unexpectedly rose in price.


Image source: TradingView

On Bitfinex, its exchange rate jumped 21.9% to $ 7.788. The spread between Bitmex and Bitfinex reached $ 970.

Some users of the Bitcoin community of Reddit have suggested that Bitcoin's Bitfinex price was caused by massive Tether sales. On exchanges such as Bitfinex, Bitmex, Binance, where the USDT was traded, the highest currency volatility was observed.

Starting from October 20, the market situation gradually begins to stabilize. On Bitfinex, the price fell from $ 7,788 to $ 6,535 (-16%), on Bitmex – from $ 6,818 to $ 6,385 (-6.3%).

What was Bitfinex's answer?

On October 7, Bitfinex rejected all these allegations in a blog post, stating:

"Bitfinex is not insolvent, and a constant flow of media articles that state otherwise will not change this."

In support of his statements, the representatives of the exchange referred to the links that lead to their cold portfolios in which the main reserves are kept:

First, Bitfinex revealed that it held a BTC value of over $ 1 billion, ETH estimated at over $ 400 million and $ 200 million of EOS. The management pointed out that this is only a fraction of what their cold portfolios contain.

Furthermore, Bitfinex stated that these portfolios represented only a small part of their property, not considering legal holdings of any kind. They also clarified that all deposits and withdrawals worked normally, although "there are problems in legal transactions, as is the case with most crypto organizations".

In a press release updated on October 15, 2018, Bitfinex clarified the following:

  1. All cryptocurrencies and fiat withdrawals are, and have been, treated as usual without the slightest interference;
  2. All fiat withdrawals (USD, GBP, JPY, EUR) are being processed and have been, as usual;
  3. Fiat deposits were temporarily suspended for certain user groups.

The exchange, with this brief and informal announcement, took into consideration the concerns that this event caused to the cryptocurrency sector and promised to implement a new and increasingly robust fiat deposit system to be available in the next 24 hours. And although he kept his word, according to a press release published on October 16, in the middle updating their order system, other questions have kind.

Today we are pleased to announce the release of Honey Framework, starting with an algorithmic order library for creating custom and complex order types on Bitfinex.https: //t.co/fWCvQnGKNX

– Bitfinex (@bitfinex) October 18, 2018

In the last few weeks you guys have almost done everything possible to create this FUD on their own – from deleting user questions on Reddit, to escaping and hiding. Why do not you authorize an independent audit? Why is not your CEO nowhere to be seen as Binance or Coinbase?

– Deniz Palo (@denlopalo) October 16, 2018

Speculators and Binance

At the same time, news and unconfirmed rumors claiming that Binance could cancel the USDT in the near future have spread among the Telegram groups and sent via e-mail.

FALSE: seen this floating around and is an obvious fake. Binance is VERY politically correct and will never write "Tether big scam" (it does not even have a grammatical meaning). This is just as bad as it was the scam "Vitalik is dead" last year. @cz_binance @binance pic.twitter.com/bd9Anvclmt

– boxmining (@boxmining) October 15, 2018

In a Tweet, Changpeng Zhao, CEO of Binance commented "too FUD" about this situation. Two days before, CZ supported on the stability of USDT, while some of its followers wonder why CZ is risking its reputation of supporting Tether:

Regulated stable currency, lol pic.twitter.com/5SRMhhh32Y

– CZ Binance (@cz_binance) October 13, 2018

Alex Kruger, a cryptocurrency trader and analyst, said the fall in the USD price could be caused by three factors:

  1. Traders opt for verified and regulated alternatives such as Gemini USD and Pax;

  2. Traders who sell USDT to buy other cryptocurrencies;

  3. Concerns about the banking services used by Tether LLC.

False news again?

Despite the trend of market stabilization, it remains to be surmised that the Bitcoin bitcoin price increase was caused by a massive sale of USDT or more serious factors. Some analysts do not exclude the speculative origin of the volatility of Tether caused by false messages in various channels and Telegram forums on the possible elimination of the USDT by KuCoin and Binance.

Bitfinex resumed accepting fiat deposits and updated its security system. The representatives stressed that "all the cryptocurrencies and fiat withdrawals are, and have been, processed as usual without the slightest interference". However, some users continue to fear losing their funds due to the inappropriate operation of the exchange services and other users & # 39; complaints, disputes. According to one of them, Bitfinex technical support specialists attributed delays in processing transactions to the change of a payment processor's banking partner.

However, any changes in the relationship with banking partners will not affect the security of user funds, said Bitfinex communications director Kasper Rasmussen. He also added that the exchange is "currently functioning [its] via a backlog of fiat withdrawals and some users unfortunately continue to suffer these delays. "

The speed with which these problems will be solved is not yet clear, but the number of complaints and user tickets, which can be traced here, show that it is not a "few" account. We hope that a new banking partner and system updates will make things clear.

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