Not long ago Bloomberg revealed that back in December 2017 one of the most significant trading platforms in the world – Bitfinex – was summoned by American controllers. Later this information was confirmed by Nathaniel Popper, The New York Times reporter, who referred to an anonymous source, acquainted with the matter.
I've confirmed that the CFTC did subpoena Bitfinex and Tether -- though the subpoena was delivered on December 6, not last week, a source familiar with the matter told me. https://t.co/7dWhKLTwg2— Nathaniel Popper (@nathanielpopper) 30 January 2018
Now, the journalist suggests that prices of ‘Big Daddy’ bitcoin and its brethren have been falsely altered by summoned Bitfinex. And this situation does not leave crypto investors unworried.
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Even before the subpoena reports, Bitfinex, which is assumed to hold more trading than any other trading platform of this type, got appalling reputation due to the mottled history of cyber-attacks and murky businesses. Furthermore, this platform has been infamous for lack of clearness and perplexing structure with registration in the Caribbean, administration in EU and bureaus in Asian countries.
Regarding cracks, it is crucial to mention that the company faced them several times – three and two years ago, as well as last year. On the whole, the exchange lost over $100 million. Suspiciously, the platform did not uncover sufficient details regarding these cyber-attacks. But, remarkably, after the 2016 hack, the exchange was excluded by Wells Fargo as well as its banks in Taiwan.
Currently, there has been conducted a probe concerning Btfinex, although initially it was not uncovered why it was subpoenaed by the US Commodity Futures Trading Commission.
What Could Be The Reason?
‘The Rally Which Never Existed’
It is crucial to emphasize that Bitfinex’s CEO – Jan Ludovicus van der Velde – simultaneously holds a position at Tether, also as a chief executive officer. Tether is a known issuer of cyber tokens, each supported by a dollar.
According to Popper writing for the newspaper, it means that novel coins are emitted only if investors pile bucks into them. That fact that Tether is bounded to the US public currency has been giving a lot of credibilities. Therefore, people have been widely employing it for purchasing bitcoin and its ilks, moving it fast between trading platforms.
But here’s the rub. Because it’s challenging to identify Tether users and track all the domestic and trans-border transactions, lawyers started being cautious about money laundering. Moreover, within the last time, lots of investors have been expressing serious concerns about Tether. Heavenly sums (equal to millions of dollars) of this cyber currency were produced, but in most of the times, it happened when the prices of other coins were falling.
As Popper stressed out, Tether was applied on the Bitfinex platform for buying considerable amounts of BTC and other cryptos. The journalist, referring to data analysis on the platform, found out that this way the prices of cyber-coins were prompted to soar.
Pantera Capital’s co-head investment officer Joey Krug believes there was something suspicious about the case:
"This became more and more concerning, because every time the markets went down, you have seen the same thing happen. It could mean that a lot of the rally over December and January might not have been real."
Albeit, not everyone agrees with this theory as they believe that small traders might be just trying to gain earnings when prices on the market are low. For example, such opinion has Jeremy Gardner, a managing partner at Ausum Ventures. He says that it is unlikely that Bitfinex used a particular coin to reverberate the price of BTC.
"If they have attempted to do so, which would be deeply concerning, it's hard to imagine that such fraudulent issuance at its current volume could single-handedly buoy the price of Bitcoin," said Gardner.
On the contrary, Pantera Capital’s Krug believes that if the Bitfinex-connected coin were an object of interest to investors, they would have still wanted to purchase Tether when prices on the market were skyrocketing, but this did not happen. At the same time, they would not perennially wish the coin in a precise gain of $100 million, as it did happen.
Tying Up Loose Ends?
Another controversial issue about Bitfinex is that last week it stopped dealing with Friedman, a company with which the exchange entered into a pact to audit it and evidence that Tether’s practices had been fair. The audit was supposed to be completed in a few months, but Bitfinex, as it seems, tied up loose ends. This case stirred up new hunches in the crypto community. Ex-trader at Goldman Sachs Jill Carlson stressed out that the fact that Bitfinew gave up on its auditor is a dangerous signal.
In the meantime, it remains unknown why US controllers summoned the company. At the same time, Bitfinex has not clarified the issue yet.
Nevertheless, as the reporter Popper remarked in the article, Bitfinex is only one of the reasons which caused recent crypto market’s slump on par with South Korea’s and China’s crackdown. On top of that, it is better not to forget the last hack that occurred to Tokyo-based exchange Coincheck, which led to the forfeiture of NEM coins worth $530 million in total.