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Tether price falters following iFinex investigation, bitcoin moved from Bitfinex

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Following a probe which revealed the apparent loss of $850 million in funds, the attorney general of the State of New York obtained a court order against iFinex Inc., which operates Bitfinex and owns Tether Ltd., ordering them to cease further dissipation of the US dollar assets which back the USDT stablecoin.

A $850 Million Cover Up

In a press release the Attorney General revealed that in 2018 iFinex Inc. handed almost a billion dollars without any written contract or assurance over to Crypto Capital Corp., a Panamanian payment processor. The idea was that Crypto Capital was going to handle Bitfinex customers-withdrawal requests. Later on, the Panamanian payment processor lost control of the funds and could no longer process the orders. After acknowledging this, iFinex Inc. failed to inform its investors of the potential losses and engaged in unlawful behavior.

“Our investigation has determined that the operators of the ‘Bitfinex’ trading platform, who also control the ‘tether’ virtual currency, have engaged in a cover-up to hide the apparent loss of $850 million dollars of co-mingled client and corporate funds,” said Attorney General James.

The report disclosed that executives of Bitfinex and Tether dealt with the liquidity shortage in a series of transactions whereby the cryptocurrency exchange gave itself access to up to $900 million of Tether’s cash reserves that were used to back the stablecoin. As stated in the press release:

“Bitfinex has already taken at least $700 million from Tether’s reserves.  Those transactions—which also have not been disclosed to investors—treat Tether’s cash reserves as Bitfinex’s corporate slush fund, and are being used to hide Bitfinex’s massive, undisclosed losses and inability to handle customer withdrawals.  The Office’s filings further detail how the companies obfuscated the extent and timing of these corporate transactions during the Office’s investigation.”

More alarmingly, the transcript revealed:

“BTC could tank to below 1k if we don’t act quickly.”

When unprocessed withdrawal requests peaked, Bitfinex stated in a Medium post on Oct. 15, 2018, that:

“All cryptocurrency and fiat withdrawals are and have been processing as usual without the slightest interference.”

Internally, the situation was different, as internal transcripts within the company revealed. A conversation between a Bitfinex executive (Merlin) and a Crypto Capital representative (CCC) showed signs the situation was getting out of control. This conversation happened on the same day that they were claiming that all fiat withdrawals were being processed as usual:

“Merlin [15.10.18, 09:53]: I have been telling you since a while.

Merlin [15.10.18, 09:53]: Too many withdrawals waiting for a long time.

Merlin [15.10.18, 09:54]: Is there any way we can get money from you? Tether or any other form? Apart with Crypto Capital we are running low on cash reserves.

Merlin [15.10.18, 09:54]: Please help.

CCC [15.10.18, 18:09:54]: I know. We are following the banks we post as many as we can and let them process as much as possible according to them. Everytime we push them they push back with account closure without reason.

Merlin [15.10.18, 09:55]: Dozens of people are now waiting for a withdrawal out of Crypto Capital.

Merlin [15.10.18, 10:01]: I need to provide customers with precise answers at this point, can’t just kick the can a little more.

Merlin [15.10.18, 10:02]: The international, I mean.

CCC [15.10.18, 10:02]: I will keep you posted here.

CCC [15.10.18, 10:02]: On the process of all international payments.

Merlin [15.10.18, 10:02]: Please understand this could be extremely dangerous for everybody, the entire crypto community.

Merlin [15.10.18, 10:03]: BTC could tank to below 1k if we don’t act quickly.”

Since the ultimate solution to fulfill customers’ withdrawal requests was to combine customer and company funds together and not disclose these actions, iFinex Inc. is now being sued for fraud by the Attorney General of the State of New York, Letitia James. The AG is not seeking to prevent legitimate trading on Bitfinex or redemptions by Tether. Instead, she wants the court to grant a preliminary injunction to “preserve the status quo” pending completion of the investigation, which has now required that the operators of the companies stop moving money from Tether’s reserves to Bitfinex’s bank accounts, halt any dividends or other distributions to executives, and turn over documents and information.

Bitfinex Fires Back

After the court order became public, Bitfinex released a statement on its website, arguing that the $850 million in question were not lost by Crypto Capital, but had been “seized and safeguarded” and it is working to get the money back. The company sustained:

“Both Bitfinex and Tether are financially strong—full stop.”

In addition, the cryptocurrency exchange suggested the attorney general’s filings were “written in bad faith and riddled with false assertions” and characterized them as an overreach. Bitfinex claimed that it had been cooperating with the investigation, and it planned to fight the order.

Notably, two things happened before and after the Attorney General’s press release was issued:

  1. On Aug. 2, 2016, roughly 119,756 Bitcoins (BTC) were stolen from Bitfinex wallets, just a few hours before a court order obtained against iFinex Inc. became public, 550 of those BTC were moved.
  2. Right after the news dropped, USDT crashed as low as $0.9551.

It’s still unclear how the loss of funds will impact Tether or Bitfinex. Given the amount of USDT circulating in the cryptocurrency markets, a loss of confidence in the stablecoin could have a material impact on the price of bitcoin.

Tone Vays, a former Wall Street analysts, believes that if Tether blows up there could be short-term panic in the market, but people will then realize that the only way to get out of it will be by quickly spending their Tethers on other cryptocurrencies that they can move out of the exchange.

Bitcoin’s hourly chart in Bitfinex adds credibility to Vays’ idea. Around the time when the news dropped, BTC fell approximately $300 before rebounding. Moreover, Jacob Canfield, the co-founder of SignalProfits.com, tweeted that 650,000 Ethereum had been withdrawn from Bitfinex and it was reported that another 3,999 BTC had also been moved off the exchange.

While the investigation continues, the court order barred the operators of Bitfinex from further draining the cash reserves of Tether or taking dividends from the reserves of the companies. The order also compels the companies to produce documents relevant to the investigation, which they have so far “failed” to do so.

Tether, currently ranked #8 by market cap, is down 1.69% over the past 24 hours. USDT has a market cap of $2.81B with a 24 hour volume of $16.98B.

Chart by CryptoCompare

Tether is down 1.69% over the past 24 hours.

Filed Under: , Crypto Exchanges, Price Watch, Regulation, Stablecoins

Ali Martinez

After Ali began forex trading in 2012 In 2014, he came across Bitcoin’s whitepaper and was so fascinated by the idea of a decentralized, borderless, and censorship-resistant currency that he started buying Bitcoin. By 2015, he started traveling to spread the word about Bitcoin.

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Commitment to Transparency: The author of this article is invested and/or has an interest in one or more assets discussed in this post. CryptoSlate does not endorse any project or asset that may be mentioned or linked to in this article. Please take that into consideration when evaluating the content within this article.

Disclaimer: Our writers’ opinions are solely their own and do not reflect the opinion of CryptoSlate. None of the information you read on CryptoSlate should be taken as investment advice, nor does CryptoSlate endorse any project that may be mentioned or linked to in this article. Buying and trading cryptocurrencies should be considered a high-risk activity. Please do your own due diligence before taking any action related to content within this article. Finally, CryptoSlate takes no responsibility should you lose money trading cryptocurrencies.

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Robinhood Zero-Fee Trading App Officially Launches in New York

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American stock brokerage Robinhood Crypto has officially launched its zero-fee crypto trading app in New York, the company announced in a blog post on May 23.

Following the acquisition of a BitLicense by the New York State Department of Financial Services (DFS) in January 2019, Robinhood now allows New York citizens to trade in seven major cryptos with no commission fee using its Robinhood Crypto platform.

From now, the Robinhood Crypto service is available in 39 states in the United States, including California, Washington and Florida, among others.

The Robinhood trading app allows for the trading of bitcoin (BTC), ethereum (ETH), bitcoin cash (BCH), litecoin (LTC), bitcoin SV (BSV), ethereum classic (ETC) and dogecoin (DOGE). Robinhood users can also track price alterations and updates for those cryptos and 10 additional coins, the blog post notes.

Earlier in April, Robinhood applied for a bank charter with regulators in the U.S. in order to offer traditional banking products and services.

Previously, the DFS granted a BitLicense to a institutional-grade crypto trading platform Tagomi Trading, enabling the company to offer trade routing and order execution services for non-security cryptos including bitcoin, ethereum, litecoin and bitcoin cash.

Recently, on April 18, Bloomberg reported that the ICE was considering acquiring a New York BitLicense to launch bitcoin futures, citing anonymous sources familiar with the matter.

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Here’s Why Bitcoin, Ethereum and Litecoin is undervalued at Spot Rates

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Heres-Why-Bitcoin-Ethereum-and-Litecoin-is-undervalued-at-Spot-Rates

Heres-Why-Bitcoin-Ethereum-and-Litecoin-is-undervalued-at-Spot-Rates

Bitcoin, Ethereum and Litecoin are still incredibly undervalued as present valuations stand. This is on account of the potential of these coins and planned upgrades to make them better according to a crypto trader and enthusiast.

Yes, Bitcoin may have rallied back to possible bull territory. However, it is still fair to say that the coin sits below its true and projected position as a currency and security. Bitcoin came about as an alternative currency with decentralization as a catch for investors and enthusiasts alike.

Bitcoin is resilient and has shrugged off legitimacy questions from naysayers time and time again. The price volatility is just a consequence of intense speculation and uncertainty common with new inventions. Nonetheless, Bitcoin’s transcendent ability to transform the financial world remains effectively eliminating borders and regulatory overreach.

Bitcoin as Digital Gold

Bitcoin is a finite currency. Notably, every fiat currency will return to its inherent value of zero at times of hyperinflation. This is clear from the Venezuelan Bolivar which is worth less than its printing paper at the moment. In this light Bitcoin can become an alternative to collapsed currencies especially in failed states.

It’s become a trusted alternative when fiat money’s value is corrupted by politics”

-John McGinnis and Kyle Roche of Wall Street Journal.

The limited availability means Bitcoin can efficiently store value at times of financial crises. This is eerily similar to gold which is also a great commodity to store value that rises in value in hard times for fiat. This has led to some proponents calling Bitcoin digital Gold and rightfully so. As such, the value of $8,000 is momentary as the developed world economy is still doing well.

Ethereum And Litecoin As Alternatives

Ethereum is a great alternative for Bitcoin. That said, the price of $270 is still on the low because of the incredible potential given the possibilities of Smart contracts. More significant is the upcoming Serenity or Ethereum 2.0 upgrade. This upgrade will significantly improve the coin by incorporating technical improvements that improve scalability and performance. At the premier Ethereum Supermeetup, hosted at Token2049, Vitalik Buterin explained the update as follows;

“(It is) a way to bring technical improvements, like PoS and sharding, together to improve the Virtual Machine, Merkle Trees, the efficiency of the protocol, and a whole bunch of small technical things that you have never heard of.”

Ethereum is in this regard still on the downside price-wise. The upgrades are necessary and timely to keep the protocol efficient.

Litecoin, on the other hand, is essentially a better version of Bitcoin. This is because the coin, while having essentially the same possibilities as Bitcoin, is more adaptable to change such as the introduction of smart contracts.

Charlie Lee, a former Google employee, who founded Litecoin, has also given financial support to the Lightning Network.  There are also possibilities of incorporating Mimble Wimble that will inherently scale the network while introducing better security and privacy for the end user. When we add the halving mix in the equation, investors and traders are convinced that we are in the early stages of a mega bull run that will propel asset prices, valuing them fairly.

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Smart contract platform Fantom chooses Binance Chain for interoperability

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Binance Chain, the blockchain from cryptocurrency exchange company Binance, and DAG-based smart contract platform, Fantom, announced today they will be working together to create a multi-asset and cross chain ecosystem.

The Fantom team said it will be supporting a multitude of tokens including the ERC-20 standard, native Fantom token (FTM) standard, along with the BEP-2 token standard on Binance Chain.

“Our reason for choosing Binance Chain as our interoperability partner over any other blockchain is simple, we’re seeing an increasing trend of great projects moving towards Binance Chain, and we want to contribute to the Binance Chain ecosystem so that all these great projects may garner added value from our contributions. Binance and Binance Chain are in a rare position of having the strongest centralized exchange and liquidity on one end, and a very cohesive decentralized ecosystem on the other end, and we believe that there is no better partner for Fantom in its push for greater interoperability within the industry.”

The Fantom Foundation

The collaboration will offer Fantom users a chance to transact and trade FTM while being in custody of their own tokens on Binance DEX.

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Robinhood Opens Trading for 7 Cryptocurrencies in New York

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Robinhood, the popular stock and crypto investing app, has officially launched bitcoin, ethereum, and other cryptocurrency trading in New York.

Silicon Valley-based Robinhood received a BitLicense from the New York Department of Financial Services (NYDFS) in January 2019 and on Thursday opened access to crypto trading in the Empire State.

From the press release:

Currently, you can invest in seven cryptocurrencies on Robinhood Crypto: Bitcoin, Bitcoin Cash, Bitcoin SV, Ethereum, Ethereum Classic, Litecoin, and Dogecoin. You can also track price movements and news for those and 10 additional cryptocurrencies.

New York is unique and problematic for crypto traders because all purveyors must apply for a BitLicense, most notably for companies that are “storing, holding, or maintaining custody or control of virtual currency on behalf of others,” according to NYDFS.

Many crypto startups have avoided the requirements entirely by becoming BitLicense refugees and refusing to do business in the state.

“Here we are two miles from the Statue of Liberty and you cannot sell CryptoKitties in the state without that license. That’s the absurdity of what’s happened here,” ShapeShift CEO Erik Voorhees complained in 2018 when asked about the controversial license at CoinDesk’s Consensus conference in New York.

Image courtesy of Robinhood

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Generation Bitcoin: 90% of Millennials Prefer Crypto to Gold: ETF Expert

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By CCN: The US investing industry stands on the precipice of a dramatic upheaval that could see bitcoin and other cryptocurrency assets replace gold in investor portfolios.

That’s according to Nate Geraci, president of the ETF Store, an independent investment advisor. He revealed in a Bloomberg TV interview that his millennial clients are clamoring to hold bitcoin in their portfolios – if only the SEC would let them.

Crypto in a Landslide: ETF Expert Says Millennials Plan to Kick Gold to the Curb

Responding to a question from Bloomberg analyst Eric Balchunas about whether he would ever invest client funds in a bitcoin ETF, Geraci stunned his fellow panel members when he said that millennial investors overwhelmingly desire to hold bitcoin instead of traditional hedge assets like gold.

How overwhelming? Ninety percent.

“When we talk to our younger clients – we have a core gold allocation in our portfolios, and they’ll ask about that and say, ‘What about crypto?’ And if you talk to, primarily millennials, and ask them which they prefer, bitcoin or gold, it’s a landslide. It’s not even close, it’s like 90% prefer bitcoin.”

Geraci’s bold claim was more anecdotal than scientific, but there’s plenty of hard data that demonstrates that younger investors are vastly more comfortable with holding cryptocurrency in their portfolios than investors who grew up in the pre-digital era.

In April, a Harris Poll survey found that 18 to 34-year-olds are “very” or “somewhat” likely to purchase bitcoin within the next five years. That might not seem overwhelming, but consider that only 37% of Americans in that demographic currently own stocks.

Similarly, a February eToro survey found that 43% of millennials trust crypto exchanges more than stock exchanges, even though crypto trading platform hacks dominate the mainstream news cycle.

ETF Would Reduce Crypto Investing Risks

bitcoin etf vaneck bitcoin price

ETF Store President Nate Geraci said that there is rabid demand for a bitcoin ETF, especially among millennials. | Source: Shutterstock

Nate Geraci further pointed to the success of the $1.5 billion Bitcoin Investment Trust (OTC: GBTC) as proof that there is sufficient market demand for a crypto ETF.

He noted that the over-the-counter product regularly trades at a staggering premium to the underlying value of its BTC assets. That’s because GBTC shares fluctuate based on supply and demand, not just the price of bitcoin. An ETF, he said, would flatten that premium and thus reduce investor risk.

“It seems a bit incongruent to me that we have that product out there trading, where investors really could get hurt if they don’t understand that premium, but we don’t have a bitcoin ETF.”

“The demand is there,” he concluded.

SEC Kicks the Bitcoin ETF Can Down the Road

Unfortunately for crypto bulls, millennials aren’t the ones manipulating the levers of the Securities and Exchange Commission (SEC), which holds unilateral authority to approve or deny bitcoin ETF applications.

The SEC, as CCN reported, continues to punt on the issue. Last week, the regulatory agency extended its long trend of delaying ruling on cryptocurrency products when it postponed its decision on the VanEck/SolidX Bitcoin ETF to August 19. Most industry insiders expect the SEC to delay the VanEck/SolidX product again, pushing its final ruling until October 18.

Dave Nadig, the managing director of ETF.com, said that he believes the SEC is still in “information gathering mode” but that there is a “reasonable chance” regulators approve the first bitcoin ETF before the end of 2019.

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