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Bitfinex Faces Legal Action From NY Attorney General: Here’s What This Means

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The New York Office of the Attorney General (AG) wants to take a closer look into the business operations of Bitfinex and related stablecoin issuer Tether (USDT). According to a legal petition filed with the Supreme Court of New York, the NY Attorney General Office of Letitia James is applying for a court order to investigate Bitfinex’s suite of interrelated companies (including its umbrella firm iFinex and Tether Holdings Limited) for “ongoing fraud” to the tune of $850 million.

What does the news mean for Bitfinex, Tether and Bitcoin?

What Is the Legal Action About Exactly?

Prompted by its findings in a 2018 investigative subpoena, the New York Office of the Attorney General alleges that Bitfinex used funds from Tether (a separate company run by the same management) to mask some $850 million in losses in customer funds resulting from potential theft or mismanagement by payment processor Crypto Capital.

Bitfinex ended up relying on the fiduciary services of the Panama-based payment processor following a roulette of troubled banking relationships throughout the years. By mid-2018, Crypto Capital held roughly $1 billion worth of combined business and customer funds on behalf of Bitfinex. The document alleges that Bitfinex entrusted Crypto Capital with these funds without signing a contract or business agreement.

Text-based correspondence cited in the document from mid-2018, which was obtained during the AG’s 2018 investigation, reveal a Bitfinex employee’s persistent yet unsuccessful attempts to retrieve funds from Crypto Capital. The payment processor claimed that the funds were seized by Portuguese, Polish and American authorities, though both the Attorney General and Bitfinex question whether this is true.

In the meantime, complaints of delayed withdrawals from Bitfinex users were rampant. The court document states that despite its issues with Crypto Capital, Bitfinex falsely claimed that cash withdrawals were unobstructed during this period.

In order to be able to continue processing withdrawals, Bitfinex ultimately transferred $625 million from Tether’s reserves. Additionally, Bitfinex established a $900 million “revolving line of credit” with Tether, and both this promise of credit and the prior transfer were conducted without Bitfinex or Tether alerting its users.

This line of credit, which Bitfinex can draw from on a need-by-need basis, is collateralized with over 60 million shares of iFinex Inc., one of the Bitfinex brand’s shell companies. These shares are owned by DigFinex, the majority owner of both Tether and iFinex.

“That transaction closed on or about March 19. 20I9. The total accessed under the loan facility as of today’s date is equal to $700 million,” the document states.

This fund shuffling and the capital mismanagement that prompted it are the crux of the legal proceedings, with the letter stating that Bitfinex has “produced only limited relevant information” regarding Tether’s $625 million transfer and $900 million line of credit.

In conclusion, the letter reads, “OAG’s ongoing investigation seeks to determine, among other things, the extent to which New York investors are exposed to ongoing fraud being carried out by Bitfinex and Tether.” To make this determination, the application seeks a court order to secure relevant business and financial information, including tax documentation, an official audit, and banking/loan documents and correspondence.

Why Is This Legal Pressure Coming Out of New York?

Bitfinex nor Tether are based in New York. Neither company possesses a BitLicense needed to operate a cryptocurrency exchange in the state, so Bitfinex officially barred its service to individuals from New York in August 2017 and to businesses in August 2018.

However, the New York Attorney General believes that the exchange was still serving (some) New York citizens regardless, and the order explicitly states that it seeks to protect “legitimate traders using the Bitfinex platform … primarily those residing in New York.”

The New York Attorney General can also invoke what is known as the Martin Act. As securities regulatory attorney Scott Andersen said on Twitter, the Act “broadly empowers the NY Attorney General to conduct civil and criminal investigations for securities law violations.” With this regulatory power, the AG can obtain a preliminary court order to elicit testimony and evidence from Bitfinex.

What Does Bitfinex Say?

In a response published on the company’s blog, Bitfinex positions itself as a company that is a good corporate citizen and strong supporter of law enforcement, and it condemns the legal action by the New York Attorney General’s Office as “gross overreach.”

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. We are and have been actively working to exercise our rights and remedies and get those funds released. Sadly, the New York Attorney General’s office seems to be intent on undermining those efforts to the detriment of our customers.”

Bitfinex further suggests that the New York Attorney General’s time would be better spent trying to aid and support the company’s recovery efforts to procure the funds held by Crypto Capital.

Is Tether Insolvent? Is Bitfinex?

Nobody can know for sure — for either company. The request for a court order, in part, hinges on this question, however, and the New York Attorney General seems to believe that Bitfinex siphoned funds from Tether’s reserves to cover up a potential insolvency.

The document stakes no claim on whether or not Crypto Capital has the funds. It’s possible that the payment processor might have the money but is refusing to give it up, just as it’s possible that they no longer hold these funds in their own accounts or that they were seized or frozen by authorities.

It should be noted that even if $850 million is inaccessible, this represents only a fraction of Bitfinex and Tether’s total holdings. Twitter reports suggest that Bitfinex withdrawals are still being processed.

Were Bitfinex/Tether Critics Right?

It depends on which critics and the timing of their criticisms. Over the years, a wide range of accusations have been leveraged against Bitfinex and Tether.

One of the best-known and severe of these accusations was that Tether was creating unbacked USDT “out of thin air,” which it used to artificially inflate the bitcoin and cryptocurrency markets. Some of these accusations go back as far as early 2017. Based on the information that is now available, these accusations appear to be false or at least unproven, and the New York Attorney General’s Office doesn’t lend them credence in its letter.

More mild accusations focused on the untransparent business practices of Bitfinex and suspicions that the exchange, with the help of USDT, was running a fractional reserve in some way or another. Seemingly corroborating these suspicions for skeptics, Tether updated its website in March to clarify that USDT is “100% backed by [its] reserves,” which could include “cash equivalents” but also “other assets and receivables from loans.” The old version assured users that each USDT was backed 1-1 with cash. Tether made this change shortly before the $900 million line of credit was established.

It appears that from the moment when Bitfinex started running into trouble with Crypto Capital, sometime in 2018, these accusations of fractional reserve practices carried validity.

What Does This Mean for Bitcoin?

While only time will tell, of course, there is little reason to believe these latest developments will have great impact on Bitcoin one way or the other.

Many bitcoin exchanges have historically had trouble finding reliable banking partners, and some of them have even had to shut down because of this. As we’ve seen with the QuadrigaCX debacle, when an exchange can’t secure proper banking partnerships, it might turn to unscrupulous payment processors–to the detriment of both its operations and its customer’s funds.

Similarly, a number of bitcoin exchanges have lost funds due to hacks or otherwise, and in some cases had to entirely close shop because of this as well. While such events have affected the bitcoin price and general sentiment in the short term, it’s not clear if this will result in long-term effects; in this case, it’s far from certain that Bitfinex will have to cease operations or accept losses at all. The company itself certainly doesn’t think so.

So far the bitcoin price has seen a somewhat modest price drop of about 5 percent. Interestingly, even USDT is trading at $0.97 on Kraken, suggesting that the market still has relative faith in the stablecoin and the company behind it (for now).

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EOS Price Prediction Today: Daily (EOS) Value Forecast – May 20

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34-Million-EOS-Officially-Burned

34-Million-EOS-Officially-Burned

  • On the upside, if the price is sustained above the EMAs, the bulls are likely to retest or break the $6.60 and $6.80 resistance levels.
  • However, if the bulls fail to break the resistance levels, the crypto’s price is likely to fall back to the range bound zone.

EOS/USD Medium-term Trend: Ranging

  • Resistance levels: $ 6.80, $7.0, $7.20.
  • Support levels: $6.20, $6, $5.80.

Last week the price of EOS was in a bullish trend. On May 16, the crypto’s price tested a high of $6.80 and was resisted. The market fell and was in a downward correction to the support level at $5.80 price level. On May 19, the crypto’s price was in a bullish move but was resisted at the $6.60 price level. The crypto’s price is above the 12-day EMA and the 26-day EMA which indicates that price is likely to rise.

On the upside, if the price is sustained above the EMAs, the bulls are likely to retest or break the $6.50 and $6.80 resistance levels. However, if the bulls fail to break the resistance levels, the crypto’s price is likely to fall back to the range bound zone. Meanwhile, the market is at the overbought region of the daily stochastic but below the 80% which indicates that price is in a bearish momentum and a sell signal.

EOS/USD Short-term Trend: Ranging

On the 1-hour chart, the price of EOS is in a bearish trend zone. On May 19, the crypto’s price reached a high of $6.52 but was resisted. The crypto’s price fell and was in a downward correction. The bears have broken the 0.236, 0382 and the 0.50 Fib. retracement levels.

The price is in a downtrend zone but the 0.618 retracement level is likely to hold. In other words, the price may fall to the $6.19 price level. Meanwhile, the market has reached the oversold region of the daily stochastic but below the 40% range. This indicates that the price of EOS is in a bearish momentum and sell signal.

The views and opinions expressed here do not reflect that of BitcoinExchangeGuide.com and do not constitute financial advice. Always do your own research.

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Bitcoin Has Soared Above Intrinsic Value During Latest Rally, JPM Strategists Claim

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Strategists from United States banking giant JPMorgan Chase (JPM) have argued that bitcoin (BTC)’s recent rally has ostensibly soared past what they calculate to be its intrinsic value. Their analysis was reported by Bloomberg on May 20.

The strategists — who reportedly include JPMorgan global market strategist Nikolaos Panigirtzoglou —  judge that the top coin has recently been trading in a way that mirrors its late 2017 rally, which preceded a protracted price slump.

To ascertain the coin’s intrinsic value, the strategists reportedly analyzed bitcoin as a commodity and calculated its cost of production based on parameters such as estimated computational power, electricity costs and hardware energy efficiency, Bloomberg notes. They reportedly stated:

“Over the past few days, the actual price has moved sharply over marginal cost. This divergence between actual and intrinsic values carries some echoes of the spike higher in late 2017, and at the time this divergence was resolved mostly by a reduction in actual prices.”

Bitcoin — which has seen a renewed lease of life since April — has traded as high as almost $8,300 within the last week — having traded sideways below $5,000 throughout February and March. In mid-December 2018, the top coin had traded below the $3,300 mark — with its current price point thus representing a roughly 150% gain over its bear market lows.

Bitcoin’s 3-month chart, Feb. 20 — May 20 2019

Bitcoin’s 3-month chart, Feb. 20 — May 20 2019. Source: CoinMarketCap

In an apparent qualification of their analysis, JPMorgan’s strategist are cited by Bloomberg as having noted that:

“Defining an intrinsic or fair value for any cryptocurrency is clearly challenging. Indeed, views range from some researchers arguing that it has no fundamental value, to others estimating fair values well in excess of current prices.”

As reported, JPMorgan CEO Jamie Dimon has long adopted a sceptical stance toward decentralized cryptocurrencies such as bitcoin, even as he steers the megabank toward launching its own blockchain-powered native settlement digital asset, JPM Coin.

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Terrified Central Bank Attempts to Arrest Myanmar’s Bitcoin Binge

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By CCN: An emerging economy which expects to attract $5.8 billion worth of Foreign Direct Investments is belittling its goals with an anti-technology stance.

Myanmar is the latest developing country that is hinting to shut doors in the face of bitcoin, a decade-old global cryptocurrency which proposes to replace banks with a decentralized network of transaction validators and bookkeepers. Anybody with a decent internet connection can participate in the bitcoin economy, which further makes it an attractive asset for people with limited gateways to participate in global economies.

But, to the Central Bank of Myanmar (CBM), bitcoin is more a liability than an opportunity. The central bank earlier this month announced that it does not recognize bitcoin as money, stating that it would not allow Myanmarese financial institutions to accept or facilitate its transactions. The same ruling applied to cryptocurrencies having properties as that of bitcoin.

Bitcoin Adoption Booming in Myanmar

MMTimes.com reports that Myanmarese investors have been increasing their stakes in bitcoin and similar cryptocurrencies lately. Local advertising for bitcoin exchanges on social media is at its peak, which is prompting more people to board the bitcoin bandwagon. CBM fears that the process might shift a considerable capital from Myanmar’s own markets to an industry that is not theirs, which is why the central bank is discouraging people from investing in or using bitcoin and similar cryptocurrencies.

U Aung Aung, an IT professional working at a multination company in Yangon, told MMTimes that Myanmarese people like him face huge restriction on banking. He admitted purchasing some $20 worth of BTC back in 2017 after finding the cryptocurrency appealing for conducting flawless ‘global e-commerce and aid.”

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There are millions of people like Aung in the world that have entered the bitcoin economy for its underlying technological potential. The frenzy went to its peak during December 2017, when the bitcoin market valuation jumped to as high as $313.89 billion, almost five times the current GDP of Myanmar. A massive downside correction in 2018 brought the bitcoin rates almost 85-percent down. Nevertheless, the market now stands near $144 billion owing to an increase in institutional interest in first-tier countries like the US, Singapore, Japan, and Switzerland.

The Choice Between Doing an India or a Japan

CBM is now left with two options: either it can restrict people from investing in bitcoin like the Reserve Bank of India did, or it can take a proactive approach like Japan or Switzerland to make Myanmar a global hub for bitcoin-related developments.

U Nyein Chan Soe Win, the chief executive of digital commerce platform Get Myanmar, CBM does not have constitutional backing to announce an outright ban on cryptocurrencies. It is likely for the lawmakers to first define bitcoin in legal books before pursuing action against or in favor of the cryptocurrency.

“Before making crypto illegal, its impact on the local currency and compatibility with existing policies should first be analyzed and discussed,” he told MMTimes.com.

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Long-term investment and a thirst for knowledge: Meet Popular Investor Maximilien912

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Max (@Maximilien912) has been passionate about the stock market since high school and has been investing on eToro for 5 years now. He has a great passion for tech and his long-term strategy is to focus on companies that are either well-established or that he believes are about to show growth. We asked him to answer a few questions about his investment style and strategy:

66% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

  1. Tell us a little  about yourself. What do you do for a living? For fun? Family?

I was born in France in 1989, and lived and studied in Paris until 2012. After I got my master’s degree in Web & Multimedia, I moved to Bangkok with my wife.

I am a web entrepreneur, specialising in SEO and affiliate marketing for more than 7 years now.

My hobbies include traveling around the world, playing and watching basketball, finding new lucrative investments and spending time with my family and cats 🙂

Today I am a Popular Investor on the eToro trading platform. I have made consistent and positive earnings on eToro for more than 4 consecutive years.

I have not always been a Popular Investor and I don’t consider myself a “stock market expert,” but rather, a value investor, who continues to learn and grow with the community, sharing the best of my knowledge and experience.

  1. Where do you do your research on the stocks you invest in?

I have a great interest in companies and businesses, so I can spend hours looking at information and data about them.

I use many sources such as Seeking Alpha, Reuters, The Motley Fool, Morning Brew, Macro Trends, a French forum for investors (Devenir Rentier) and even Wikipedia for basic information about a company.

  1. Did you have previous experience with financial investments before joining eToro?

I have been really into the stock market since high school and I started to invest as early as I could, using CFDs. When I discovered eToro back in 2014, I immediately fell in love with it. It’s the simplest platform to start with and it’s simply the best in regards to the social aspect.

  1. Do you have any specific profit goals for this year? How do you plan to achieve them?

My profit goal for 2019 is to achieve growth of at least +10% without adding any risk (as of now I am at +18.5%). I focus my investments on companies which I deeply understand and which thrive in their respective industries (great net income over the years and ambitious plans for the future).

My portfolio is diversified, with about 50 companies in many industries like Technology, Financial, Consumer Goods, Healthcare, Services and others.

  1. Are there any stocks that you have your eye on but are not yet investing in?

Actually I have a lot of them 🙂

Here are some stocks/companies that I am watching carefully: Visa, Vivendi, Hermès, Kering, Yum, Nike, Microsoft, HubSpot, Shopify and Cisco.

eToro makes it very easy to follow them thanks to the Watchlist feature.

  1. What is your type of trading strategy and what is it focused on?

I prefer to use the term investing as I always buy stocks for the long run. I have a big interest in tech companies and I work with them on a daily basis, so I understand them pretty well.

I invest in companies that are already doing very well in their markets, or those which will thrive in the next few years.

Day trading has been heavily advertised to allow beginners to make “quick and easy” money – but the odds are stacked against them, like in a casino.

This is why I have built a long-term stock portfolio that is profitable, diversified and resilient.

  1. What are the benefits of being a Popular Investor?

Being a Popular Investor on eToro is a great opportunity. First we get rewarded with a monthly payment according to our AUM (assets under management).

As a voice to this huge community of traders, we are able to guide starters to make the right moves and get rewarded by copying the right people.

Besides, eToro offers a lot of support through its newsletter, this blog, webinars and meetups.

As a Popular Investor, my goal is to help my followers and copiers as much as I can, so that I can make them richer and increase my AUM.

  1. Why do you think eToro clients should copy you?

Copying my portfolio would be a great way to achieve  profitable and sustained growth over the coming months and years. As a long-term trader, I work strongly with safety positions.

Most of my investments are stocks, all in low risk conditions. I focus on companies with many consecutive years of positive net income.

A good beginning amount to copy me with is $1,000 or more. But around the world, we have different incomes, so if that’s not something you can afford, you can start with a minimum of $200.

66% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

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Long-term investment and a thirst for knowledge: Meet Popular Investor Maximilien912

Published

on

Max (@Maximilien912) has been passionate about the stock market since high school and has been investing on eToro for 5 years now. He has a great passion for tech and his long-term strategy is to focus on companies that are either well-established or that he believes are about to show growth. We asked him to answer a few questions about his investment style and strategy:

66% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

  1. Tell us a little  about yourself. What do you do for a living? For fun? Family?

I was born in France in 1989, and lived and studied in Paris until 2012. After I got my master’s degree in Web & Multimedia, I moved to Bangkok with my wife.

I am a web entrepreneur, specialising in SEO and affiliate marketing for more than 7 years now.

My hobbies include traveling around the world, playing and watching basketball, finding new lucrative investments and spending time with my family and cats 🙂

Today I am a Popular Investor on the eToro trading platform. I have made consistent and positive earnings on eToro for more than 4 consecutive years.

I have not always been a Popular Investor and I don’t consider myself a “stock market expert,” but rather, a value investor, who continues to learn and grow with the community, sharing the best of my knowledge and experience.

  1. Where do you do your research on the stocks you invest in?

I have a great interest in companies and businesses, so I can spend hours looking at information and data about them.

I use many sources such as Seeking Alpha, Reuters, The Motley Fool, Morning Brew, Macro Trends, a French forum for investors (Devenir Rentier) and even Wikipedia for basic information about a company.

  1. Did you have previous experience with financial investments before joining eToro?

I have been really into the stock market since high school and I started to invest as early as I could, using CFDs. When I discovered eToro back in 2014, I immediately fell in love with it. It’s the simplest platform to start with and it’s simply the best in regards to the social aspect.

  1. Do you have any specific profit goals for this year? How do you plan to achieve them?

My profit goal for 2019 is to achieve growth of at least +10% without adding any risk (as of now I am at +18.5%). I focus my investments on companies which I deeply understand and which thrive in their respective industries (great net income over the years and ambitious plans for the future).

My portfolio is diversified, with about 50 companies in many industries like Technology, Financial, Consumer Goods, Healthcare, Services and others.

  1. Are there any stocks that you have your eye on but are not yet investing in?

Actually I have a lot of them 🙂

Here are some stocks/companies that I am watching carefully: Visa, Vivendi, Hermès, Kering, Yum, Nike, Microsoft, HubSpot, Shopify and Cisco.

eToro makes it very easy to follow them thanks to the Watchlist feature.

  1. What is your type of trading strategy and what is it focused on?

I prefer to use the term investing as I always buy stocks for the long run. I have a big interest in tech companies and I work with them on a daily basis, so I understand them pretty well.

I invest in companies that are already doing very well in their markets, or those which will thrive in the next few years.

Day trading has been heavily advertised to allow beginners to make “quick and easy” money – but the odds are stacked against them, like in a casino.

This is why I have built a long-term stock portfolio that is profitable, diversified and resilient.

  1. What are the benefits of being a Popular Investor?

Being a Popular Investor on eToro is a great opportunity. First we get rewarded with a monthly payment according to our AUM (assets under management).

As a voice to this huge community of traders, we are able to guide starters to make the right moves and get rewarded by copying the right people.

Besides, eToro offers a lot of support through its newsletter, this blog, webinars and meetups.

As a Popular Investor, my goal is to help my followers and copiers as much as I can, so that I can make them richer and increase my AUM.

  1. Why do you think eToro clients should copy you?

Copying my portfolio would be a great way to achieve  profitable and sustained growth over the coming months and years. As a long-term trader, I work strongly with safety positions.

Most of my investments are stocks, all in low risk conditions. I focus on companies with many consecutive years of positive net income.

A good beginning amount to copy me with is $1,000 or more. But around the world, we have different incomes, so if that’s not something you can afford, you can start with a minimum of $200.

66% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

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