Bitcoin Battered On Report Bitfinex, Tether Were Subpoenaed Last Month

Update 1440ET: according to the NYT's Nathaniel Popper, while the CFTC did subpoena Bitfinex and Tether -- the subpoena was delivered on December 6, not last week. Still, it is unclear where in the process the CFTC may be, and what it means for Bitfinex and Tether.

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Update 1255ET: Bloomberg reports that U.S. regulators are scrutinizing one of the world’s largest cryptocurrency exchanges as questions mount over a digital token linked to its backers. This follows reports of the company severing its relationship with its auditor.

As Bloomberg details, the U.S. Commodity Futures Trading Commission sent subpoenas last week to virtual-currency venue Bitfinex and Tether, a company that issues a widely traded coin and claims it’s pegged to the dollar, according to a person familiar with the matter, who asked not to be identified discussing private information.

The firms share the same chief executive officer.

“We routinely receive legal process from law enforcement agents and regulators conducting investigations,” Bitfinex and Tether said Tuesday in an emailed statement. “It is our policy not to comment on any such requests.”

The reaction in cryptos was modest but lower as Bitcoin tumbled below $10k once again...


Could Bitfinex, the world's largest, Hong-Kong based cryptocurrency exchange, be headed for a Mt. Gox-style collapse? It's starting to look that way.

As we detailed here, when Mt. Gox first halted customer withdrawals in February 2014, it waited more than two weeks to admit the truth to its customers: that hackers had stolen more than $450 million of their assets, leaving the exchange bankrupt and them holding the bag.  That hack effectively crippled the entire digital currency ecosystem, ushering in a two-year bear market that at one point carried the bitcoin price below $200, from what was then a record high north of $1,200 reached in November 2013.

So when another exchange engages in similarly shady behavior - withholding critical information about customer funds, or failing to produce audited financials despite promising to do so - it should prompt crypto traders to ask themselves why, with dozens, if not hundreds, of cryptocurrency exchanges operating around the world, they're choosing to do business with this one.

That's the question that customers of Bitfinex should be asking nearly two weeks after the exchange, once one of the world's largest, first revealed that it had been cut off from sending outbound dollar-denominated wires to its customers.

Of course, halting customer withdrawals isn't uncommon in the cryptocurrency world: All three of China's largest exchanges suspended customer withdrawals in February. And last year, Kraken, one of the biggest U.S.-based exchanges, suspended withdrawals temporarily because of a glitch in its trading software.  But this freeze is particularly troubling because, like Mt. Gox, Bitfinex inexplicably decided to wait before informing customers of a critical problem. It also has implications that stretch beyond the bitcoin market, to another cryptotoken called tether that was launched by Bitfinex back in January 2015, and has since been dogged by allegations that it's a scam.

The halt is already costing Bitfinex's customers money. On Tuesday, bitcoins were going for $1,547 on Bitfinex's platform, a premium of more than $100 over most of the other popular exchanges. Investors, apparently, feel that eating a 7%-8% loss is preferable to leaving their assets in Bitfinex's care any longer.

Reddit users reported that wire transfers requested as early as March 9 were cancelled, and that the exchange offered only vague excuses as to why. It took the exchange until April 13, after it had filed a lawsuit against Wells Fargo & Co., whose correspondent banking division had effectively shut Bitfinex out of the global financial system, that the exchange disclosed the problem to its customers.

And while Bitfinex has repeatedly said it would make things right - it has promised to either establish a new banking relationship and to allow customers access to other fiat currencies  - only a handful of customers have been able to get their assets out of the exchange.

As part of the freeze, Bitfinex has established a moratorium on cashing in tether tokens held by its customers. These tokens were created by Bitfinex in 2015 to allow customers to exchange an asset that's pegged to the dollar at a one-to-one ratio, allowing them to avoid costly wire transfers that must be processed through the banking system.

But the withdrawal freeze has put pressure on the tether market; for only the second time since they were introduced, investors are selling these tokens at a discount. The price of a single token has been languishing below the $1 level for more than a week.

More troubling still is that Bitfinex has so far refused to provide an audit of the fiat funds that allegedly backstop the tether float, despite promising that it would be "fully transparent and audited to demonstrate 100% reserves at all times" when it first launched the token.

This has lead some to speculate that the exchange could be commingling tether funds with other customer assets.

While evidence of this could cause irreparable damage to Bitfinex's reputation, leading to a wave of withdrawals that could add further strain to its already thinning bitcoin reserves, as Twitter user @Bitfinexed points out, it's not technically a violation of the tether terms of service.

Here's an excerpt: "There is no contractual right or other right or legal claim against us to redeem or exchange your tethers for money. We do not guarantee any right of redemption or exchange of tethers by us for money. There is no guarantee against losses when you buy, trade, or redeem tethers."

Given the preponderance of scams in the cryptocurrency market, investors who haven't already, should probably take what's left of their money and run, if they can of course.

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Having bounced back from the Coincheck-hack crash, cryptocurrencies are extending yesterday's ugliness today and accelerating to the downside...


Bitcoin is back below the Coincheck crash lows...


There are no clear catalysts for this drop.

Deutsche Bank  executives have suggested that “governance” that will legitimize crypto investments could exist in “five to ten years.”

Originally speaking in an interview with Bloomberg on Monday, Jan. 29, Mueller cautioned against current investment in cryptocurrency as only for those “who invest speculatively” while appealing for businesses in the sphere to work together with regulators.

“Once security and the corresponding trust have been created, cryptocurrencies can be assessed and evaluated like established asset classes,” he forecast.

“It’s possible that the required governance will be in existence in five to ten years.”

Deutsche Bank has traditionally taken a bearish view on cryptocurrencies as prices rise, cautioning in December that a major fall in Bitcoin was being “discounted as a small issue” by financial markets.

The lack of volatility in traditional stocks was driving investor interest in more risky assets such as Bitcoin, fellow Deutsche Bank analyst Masao Muraki determined in a note mid-January.

“Now, a growing number of institutional investors are watching cryptocurrencies as the frontier of risk-taking to evaluate the sustainability of asset prices,” he wrote.

Germany continues to fall behind in its treatment of cryptocurrencies at consumer level, providing a stark contrast to initiatives in other countries, such as neighboring Switzerland.

Earlier this month, the country’s central bank director nonetheless precluded comments from UK and US lawmakers at the World Economic Forum 2018 that regulation of cryptocurrency should be a joint international effort.

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As a reminder this early-year weakness in crypto is not unusual...

As CoinTelegraph notes, the lead up to Chinese New Year is one of high spending as people book all sorts of travel and holidays, not to mention buy presents. Thus, just like Christmas and December is a time for spending in the West, January has a similar pattern in the east.

With Bitcoin’s value almost halving from $20,000 in the middle of December to $10,000 at its worst in January, Wallin is both unperturbed or surprised.

“The January drop is a recurring theme in cryptocurrencies as people celebrating the Chinese New Year, aka Lunar New Year, exchange their crypto for fiat currency,” explains Alexander Wallin, CEO of trading social network SprinkleBit, as quoted by Bloomberg.

“The timing is about four to six weeks before the lunar year when most people make their travel arrangements and start buying presents,” he added.

The holiday takes place on Feb. 16; however, the build-up is where people start to spend their money. And with the Chinese population heavily vested in Bitcoin, it has a huge role to play on the movement of the market.

The thoughts are that people have been taking their profits into the build-up of the New Year, turning their Bitcoin into fiat currency to use for gift buying.


shitshitshit JimmyJones Tue, 01/30/2018 - 10:51 Permalink

There is no clear catalyst for this yet other drop besides the fact that dumb money had dried up. The casino will soon close its doors. People will rush towards exit doors conveniently placed before a series of stairs. It's high time to subscribe to a decent dental or burial insurance plan bitchez. 

There once was this one gurl who bragged about going Galt or something. Now would be the time to shut her mouth up and observe what a nascent bear market looks like.


In reply to by JimmyJones

Buckaroo Banzai Crazy Or Not Tue, 01/30/2018 - 12:18 Permalink

The FUD around Tethers is a major contributor to this crypto market weakness IMO. A few shrill voices have made a lot of allegations and accusations without actually producing any tangible proof of malfeasance. Tether didn't help its own cause much by firing its auditor the other day. Tether claimed the auditor was dragging their feet and not delivering answers quickly enough which might be a legitimate beef but it sure didn't look good.

In reply to by Crazy Or Not

Mine Is Bigger tmosley Tue, 01/30/2018 - 13:06 Permalink

lol Where are the shills that were pumping useless penny alto-cryptos  a couple weeks back?

They would be the first to go, and Bcash next if the market really crashes.

What is the reason for BCash's existence, anyway? A method of payment? There are dozens of altos that do that better than Bcash. The only reason BCash is still where it is is it has "Bitcoin" in its name.

In reply to by tmosley

pods manofthenorth Tue, 01/30/2018 - 14:02 Permalink

A good kick in the nuts will be good long term for cryptos. The hype from say, November till now was like taking the entire dot com hype, boiling down to condense it, then shooting that right in your arm.  BTC was jumping $1k per day, $2k per day. People were giddy. Everything got a bid.  Supermodels and Evander Holyfield started pimping tokens. ICOs were the daily thing. It was like wonderland.

That is not sustainable nor healthy for something that many hope would come to compete with the current fiat system.

So a drop down to $5k for BTC, a shakeout of weak hands, and the implosion of many of the shady shops will help cryptos in the long run. Much healthier to have that then keep up with the current moonshot trajectory, which would guarantee a spectacular explosion, thus ending the cryptocurrency experiment.


In reply to by manofthenorth

ProstoDoZiemi pods Tue, 01/30/2018 - 17:23 Permalink

A shake out of that magnitude would only invite more bankers to the party IMHO, for prices to stall or even go lower a bit for a quarter or 2 would seem more reasonable.

Coincidence in the first futures such that prices were being pumped to then get slammed as expiration drew closer.... I dunnooo something fishy....

In reply to by pods

Golden Phoenix heddahenrik Tue, 01/30/2018 - 23:44 Permalink

This is how full of lies BCASH people are.

Looking at today's chart the Satoshi/byte fees for BTC go up to about 200-300:

Looking at today's chart the Satoshi/byte fees for BCH go up to about 450-500:

BTC # of transactions in 24 hours: 22,664

BCH # of transactions in 24 hours: 1,765

So, yeah, do tell us more about one of those coins being more expensive and no one using it. Just get the right one instead of shilling your shit.

In reply to by heddahenrik

BallAndChained Mine Is Bigger Tue, 01/30/2018 - 18:23 Permalink

> As part of the freeze, Bitfinex has established a moratorium on cashing in tether tokens held by its customers.

Obviously it is all a giant Ponzi. Most of the Bitcon had ZERO cash put in. It was created out of thin air. Only the late people at the bottom of the Pyramid put in any significant cash. There is not enough cash to go around. Not enough musical chairs for people to sit on.

Converting Bitcon backed by so little cash into Tether makes Tether backed by almost nothing too. Impossible for them to redeem all Tether on a one for one basis for cash. There just isn't enough real cash to go around, like all Ponzis. And no, not paying interest doesn't make it any less of a Ponzi.


In reply to by Mine Is Bigger

jthepapershredder Mine Is Bigger Tue, 01/30/2018 - 15:09 Permalink

Is that you Bitfinex?

What??!! We are talking about a near $3 billion fraud here.... Tether has printed more USDT in 2018 (nevermind last years) than the FED has printed Dollars.

If it is as @bitfinexed expects, then the whole crypto system is at an existential risk from this.

All pairs are priced in BTC, if it goes bang, what do you think will happen to the others?

This is like Mt. Gox x 1000

but...time will tell...


In reply to by Mine Is Bigger

Buckaroo Banzai Brekyrself Tue, 01/30/2018 - 16:30 Permalink

Exchanges that use Tether don't "skate" the rules, they simply push the compliance risk onto a third party. Tether was created to be a central fiat dollar-to-crypto onramp. It's not a terrible idea as far as it goes, but it centralizes some of the exchange fraud risk, and centralizing risk can have bad consequences.

IMO it's just as likely that shorts are pushing the Tether FUD to drive out the weak hands so they can make their short futures positions good, and then build a long position in BTC, as it is likely that Tether is engaging in misfeasance or malfeasance.

In reply to by Brekyrself

. . . _ _ _ . . . JimmyJones Tue, 01/30/2018 - 11:56 Permalink

Sports betting is a good example.
Here's another: would you rather give your credit card number to a porn site, or would you rather just send some coin anonymously? There won't be any bank/CC statement for your wife to find, no spam to your email, and nobody selling your info online... not to mention identity theft or buying things on your dime.

In reply to by JimmyJones

SilverDOG shitshitshit Tue, 01/30/2018 - 11:23 Permalink





The FED has gots to talks and the FED has gots to shines.

Cryptos are led by futures controlled BTC.

With tangents of hearsay, rumors, and and and digital paper currency fireworks, yep.

Look back to the date control was applied through CP CryptoPaper baby !

Just like uranium, gold, silver etc etc.

No manipulation here, move along now move along.

In reply to by shitshitshit

SilverDOG . . . _ _ _ . . . Tue, 01/30/2018 - 13:52 Permalink

That's "Like gag me with a spoon!"

Psychological overview optics.

When metals fall...

When staawwks fall...

When bonds fall...

Whether a sector or all, group mentality rules.

Exceptions exist and are commonly viewed as anomalies.

Overview, not deep throating a spoonful.

View the charts of futures BTC over BTC.

"Houston, we have a problem".

Not a problem for Dimon, or FED, or GS.

Just spoon lovers.



In reply to by . . . _ _ _ . . .