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Abnormal activity on Bitfinex

May 2, 2019

11 out of 12 cryptocurrencies with a capitalization more than $ 1 million completed the previous week in the red zone. BTC is kept at zero level, fixing the minimum profit, while all other cryptocurrencies from TOP 12 by capitalization are reducing.

Stellar (XLM) became the outsider of the week, losing more than 10%.

Monero (XRM), EOS and Bitcoin Cash (BCH) fell by more than 7%.

Capital migration or investors panic?

The first major transaction of 3999 BTC was noticed on Thursday, April 25. According to Whale Alert, this transaction took place at 22:43:55 UTC, and in the morning, 13,337 BTC and 1,580 BTC were withdrawn from  Bitfinex. In total,18,956 BTC (more than S100 million) were withdrawn in large transactions.

Over the same time, more than 0.5 million ETH, 7.13 million XRP, 1,500 MRK and 5 million USDT were withdrawn from the exchange. According to the data provided by Whale Alert, the total amount withdrawn from the Bitfinex exchange exceeds $ 320 million.

Analysts and experts associate the unusual outflow of funds from the Bitfinex exchange with a lawsuit filed by the New York prosecutor’s office against iFinex Inc., operator of Bitfinex and Tether.

On Thursday, April 25, the State Prosecutor’s Office of New York obtained a court enjoining iFinex Inc., stating that it has engaged in a cover-up to hide the apparent loss of $850 million of a co-mingled client and corporate funds.

“New York state has led the way in requiring virtual currency businesses to operate according to the law.  And we will continue to stand-up for investors and seek justice on their behalf when misled or cheated by any of these companies,” said Attorney General James.

Tether’s reserves,  as is being stated, have been used to fill the shortage, but this was not reported to customers. At the moment, the prosecutor’s office says, they determined that Tether lent at least $ 700 million for these purposes.

Market reaction

This lawsuit had a reasonably strong pressure on most of the largest cryptocurrencies. BTC collapsed by more than 6%, but soon the panic was, and buyers managed to return the price to the level of $5500. While the remaining coins from TOP 12 by capitalization could not fully recover from the collapse.

The overall market sentiment remains moderately negative.


Zhao Dong, an investor and stakeholder in Bitfinex, in a conversation with CoinDesk, stressed the financial stability of the Bitfinex cryptocurrency exchange. Previously, he had repeatedly reassured the cryptocurrency community at the time of various difficulties with the exchange.

According to Dong, Giancarlo Devazini, Bitfinex CFO, personally assured him that current problems are temporary. A top manager of the exchange added that “it need[s] a few weeks and the funds will be unfrozen.”

“What the information I have right now is there are no losses, but the funds belong to clients. If the U.S. government seized the funds, they should know, the funds don’t belong to Bitfinex or Tether, it’s the clients’ money,” added Dong.

Tether is only 75% secure

Alex Kruger, a cryptocurrency analyst and researcher, states that the stable coin Tether (USDT) is provided with currency reserves of only 75%. He came to this conclusion after analyzing the current situation around Bitfinex and Tether.

The first thing he notes is that Bitfinex had a “hole” of $850 million, formed at the end of last year.

“Tell me, which bank can boast a full redundancy? Not one, – shares the Bitfinex investor. – Most banks are covered by reserves only by 2-3%. As for Tether, even if $ 800 million is lost, the company will remain covered by reserves of 70%.”

Kruger notes that the funds are “stuck” in third-party processing of Crypto Capital. Also, the prosecutor’s office of New York confirms the transfer of the Bitfinex cryptocurrency exchange of $ 850 million of corporate and client funds to the payment service provider from Panama Crypto Capital Corp. Representatives of this corporation claim that the authorities of several countries confiscated the funds.

Bitfinex management suspected payment processor in fraud, discontinuing cooperation with them.

This news once again indicates high risks and lack of transparency, even if we are talking about the largest cryptocurrency exchanges. Of course, this reduces investors’ confidence, putting pressure on the market.

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