Bitfinex, Inc.
Type of businessPrivate
Available inEnglish, Russian, Chinese, Spanish, Turkish, Portuguese
Founded2012 (2012)
Area served52 countries
ProductsCryptocurrencies

Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, Litecoin, Ripple, OmiseGO, Monero, NEO, EOS

Fiat Currencies

USD, EUR, JPY, GBP
ServicesCryptocurrency exchange, P2P Margin trading, P2P Margin lending, OTC
URLwww.bitfinex.com

Bitfinex is a cryptocurrency exchange owned and operated by iFinex Inc, and is registered in the British Virgin Islands.[1][2] Bitfinex was founded in 2012. It was originally a peer-to-peer Bitcoin exchange, and later added support for other cryptocurrencies.

Bitfinex was one of the first professional platforms built for cryptocurrency trading. It offers high-volume trading and both spot and derivatives products, including exchange trading, margin trading, margin funding (P2P lending), over-the-counter markets, and derivatives trading.[3]

History

2012: Early history

Bitfinex was founded in December 2012 as a peer-to-peer Bitcoin exchange offering digital asset trading services to users worldwide. Bitfinex initially started as a P2P margin lending platform for Bitcoin and later added support for more cryptocurrencies. It was one of the first professional platforms built for cryptocurrency trading.[4]

Raphael Nicolle, an IT technician from Paris, launched Bitfinex following a previous project called Bitcoinica. He continued to work as a developer for the platform until the beginning of 2017.[4]

Bitfinex was designed to offer high-volume trading and both spot and derivatives products, including exchange trading, margin trading, margin funding (P2P lending), over-the-counter markets, and derivatives trading.[5]

2015–2016: New partnership and security breach

In 2015, Bitfinex partnered with Palo Alto company BitGo to offer highly-secured "wallets" that allow people to store their digital currencies online. BitGo has insurance against Bitcoin theft.[6]

In May 2015, the exchange was hacked, which resulted in the loss of 1,500 Bitcoins or about $400,000 USD of their customers' assets.[7][8]

In June 2016, the U.S. Commodity Futures Trading Commission ordered Bitfinex to pay a $75,000 fine for offering illegal off-exchanged financed commodity transactions. The order also found that Bitfinex violated the Commodity Exchange Act by not registering as a Futures Commission Merchant.[9]

2016 hack

In August 2016, Bitfinex announced it had suffered a major security breach.[10] Immediately thereafter, Bitcoin's trading price plunged by 20%.[11] After learning of the breach, Bitfinex halted all Bitcoin withdrawals and trading.[2] In that hack, the second-biggest breach of a Bitcoin exchange platform, 119,756 units of Bitcoin,[11] worth about $72 million at the time, were stolen. The Bitcoin was taken from users' segregated wallets and Bitfinex said it was tracking down the perpetrators of the hack.[12] Exchange customers, even those whose accounts were not broken into, had their account balance reduced by 36% and received BFX tokens in proportion to their losses.[13] All users who kept their BFX tokens were reimbursed in full within eight months of the hack, in April 2017.[14] The exchange's access to U.S. dollar payments and withdrawals was then curtailed. The hack happened even though Bitfinex was securing the funds with BitGo, which uses multiple-signature security.[15]

The United States Department of Justice recovered the stolen Bitcoin,[16] and a New York couple, Ilya Lichtenstein and his wife, Heather R. Morgan, was federally charged in February 2022 with conspiring to launder the Bitcoin, which was then worth $3.6 billion.[17][18] According to Justice officials, Lichtenstein and Morgan are charged with conspiracy to launder money and conspiracy to defraud the United States.[18] On 10 February 2022, it was reported that Heather Morgan was detained in Manhattan on 8 February 2022 with her husband, Ilya Lichtenstein.[19] Lichtenstein and Morgan appeared for a plea hearing on 3 August 2023 in Washington, according to court records.[20][21] They were charged in the case with a document known as an information, which is a type of charging document that federal prosecutors typically use when defendants have agreed to plead guilty.[22]

Since Lichtenstein and Morgan's arrests, the government seized another $475 million tied to the attack.[23]

In August 2023, Ilya Lichtenstein pleaded guilty to a conspiracy to launder stolen cryptocurrency in Washington, D.C. His wife, Heather Morgan, also pleaded guilty to two charges, money laundering conspiracy and conspiracy to defraud the United States government. The value of the stolen Bitcoin ended up being worth $4.5 billion.[23][24][25]

Lichtenstein also admitted to being the original hacker of bitcoin in the 2016 cyberattack on Bitfinex.[23]

Referring to the 2016 hack, IRS Commissioner Charles Rettig said, "This was also the largest single financial seizure recorded by the federal government."[26]

Separately, Bitfinex worked with the U.S. Department of Homeland Security to recover about $315,000 in cash and cryptocurrencies stolen in the 2016 breach. The funds will be redistributed to holders of Bitfinex's Recovery Right Tokens, digital coins issued to people who suffered financial losses due to the hack.[27]

There was concern their customers' money had been lost in several incidents, but the missing funds were not lost but seized and safeguarded. During this same period, Bitfinex found that obtaining banking services was more and more difficult.[28][29][30] Research suggests that price manipulation of bitcoin on Bitfinex accounted for about half of bitcoin's price increase in late 2017.[31]

iFinex issued the cryptocurrency Unus Sed Leo in 2019. Once the U.S. announced that most of the stolen funds were recovered, Leo's value surged more than 50%. Bitfinex promised to repurchase and burn outstanding LEO tokens within 18 months of the funds’ recovery.[32]

2017–2018: Banking changes

In April 2017, Bitfinex announced it was experiencing delays in processing USD withdrawals after Wells Fargo cut off[33] its wire transfers. Shortly after the Wells Fargo cutoff, Bitfinex stated all international wires had been cut off by its Taiwanese bank. Since then, Bitfinex has moved between a series of banks in other countries without disclosing to customers where the money is kept.[34][33][35]

Noble Bank International of San Juan, Puerto Rico reportedly handled some dollar banking for the exchange in 2017 or 2018.[36] The banking relationship was reportedly terminated in September 2018 as Noble Bank encountered financial difficulties.[37]

In March 2018, British Virgin Islands-based Bitfinex confirmed the exchange’s plans to relocate its primary server infrastructure to Zug, Switzerland.

In May 2018, Bitfinex emailed some of its users asking for some tax details, which the company indicated it would share with the government of the British Virgin Islands, which might, in turn, pass it on to the governments of the users' countries of residence.

Phil Potter, Chief Strategy Officer of Bitfinex, left the exchange on June 22, 2018.[38]

On October 15, 2018, Bitfinex said that a few days earlier it temporarily paused fiat deposits for certain customers amid processing complications. On October 7, the company also said that "Bitfinex is not insolvent."[39]

2019: Launch of Tether investigation

Tether is a cryptocurrency stablecoin pegged to the U.S. dollar. It is owned by iFinex, which also owns Bitfinex. It was launched as RealCoin in July 2014 and was rebranded as Tether in November 2014. As of January 2023, Tether was the third-largest cryptocurrency after Bitcoin and Ethereum with a market cap of $68 billion.[40] Tether and Bitfinex funded the development of HolePunch, an encrypted, peer-to-peer communication platform and made its code open-source in December 2022. Paolo Ardoino, the chief technology officer of Bitfinex and Tether, said that this technology is the "Bitcoin of communications."[41]

In April 2019, New York Attorney General Letitia James launched an investigation accusing Bitfinex of using the reserves of Tether, an affiliated company, to cover up a loss of $850 million to a Panamanian payment processor known as Crypto Capital Corp.[42][43] Reggie Fowler, who is alleged to have connections with Crypto Capital, was indicted on April 30, 2019, for running an unlicensed money-transmitting business for cryptocurrency traders.[44] He is believed to have failed to return about $850 million to an unnamed client. Investigators also seized $14,000 in counterfeit currency from his office.[44] Bitfinex had been unable to obtain a normal banking relationship, according to the lawsuit, so it deposited over $1 billion with a Panamanian payment processor known as Crypto Capital Corp. No contract was ever signed with Crypto Capital.[43] James alleged that in 2018 Bitfinex knew or suspected that Crypto Capital had absconded with the money, but that their investors were never informed of the loss.[43]

Bitfinex's reported figures for 2017 were $333.5 million in gross profits, $6.8 million in expenses, $326 million in net profit, and $246 million in dividends.[45]

2020–2023: Acquisitions and investments

On October 15, 2021, it was announced that Bitfinex would pay a $1.5 million fine to the Commodity Futures Trading Commission for illegal, off-exchange retail commodity transactions in digital assets with Americans.[46]

Bitfinex launched a new payment technology that would allow online merchants to receive contactless and borderless cryptocurrency payments in 2021, called Bitfinex Pay.[47]

Bitfinex, Kraken, and KuCoin began exploring ways to enter the Indian cryptocurrency market in 2021.[48]

In September 2022, Bitfinex, alongside several other leading exchanges, temporarily paused all deposits and withdrawals of Ethereum-based tokens during the Ethereum software upgrade known as the Merge.[49]

In December 2022, Bitfinex released its "Freedom Manifesto," a document that highlights the advancement of distributed, open-source software that aligns with the libertarian ideas of Austrian School economists and cypherpunks' approach to writing code.[41][50]

As of January 2023, Bitfinex plans to open an office in El Salvador. El Salvador plans to issue its "volcano" token this year, which will be issued using blockchain technology, and which will trade on Bitfinex's exchange.[51] In April 2023, Bitfinex was granted a license by El Salvador’s National Digital Asset Commission to operate in the country. This was the first license for digital service providers in El Salvador.[52] The license permits Bitfinex Securities El Salvador to facilitate tokenized assets.[53][54]

On May 24, 2023, Bitfinex announced it would invest in the Chilean cryptocurrency exchange Orionx. Bitfinex stated that it aims to expand its presence in Chile and Latin America.[55]

Bitfinex launched its peer-to-peer trading platform in Venezuela, Argentina, and Colombia in June 2023. The platform, Bitfinex P2P, gives people in these countries the ability to directly buy and sell popular cryptocurrencies like Bitcoin, Tether's EURT stablecoin, Tether Gold, and Ethereum.[56]

Tether

Tether is a cryptocurrency (a so-called stablecoin) which Tether Limited had claimed to be pegged to the US dollar. Tether is closely associated with Bitfinex, with whom, as of 2018, they shared common shareholders and management.[38]

In 2017, critics raised questions about the relationship between Bitfinex and Tether.[34][57][33]

In February 2021, Bitfinex agreed to pay $18.5 million in a settlement with the New York Attorney General's office regarding allegations over Bitfinex parent iFinex making false statements about the backing of Tether and the movement of hundreds of millions of dollars between the two companies to cover up massive losses by Bitfinex in 2017 and 2018.[58] As part of the agreement, Bitfinex will maintain its prohibition on trading activity with New Yorkers.[59]

In 2021, Bitfinex repaid their remaining loan balance to Tether in full.[60]

On August 4, 2023, the class action lawsuit against Tether and Bitfinex was dismissed by Chief Judge Laura Taylor Swain of the U.S. District Court for the Southern District of New York. The court found that the plaintiff lacked "plausible allegations of injury" because there was no evidence showing "USDT had a diminished actual value."[61]

See also

References

  1. ↑ "Company Overview of iFinex Inc. (BVI)". Bloomberg. Archived from the original on July 1, 2018. Retrieved June 30, 2018.
  2. 1 2 Shekhtman, Lonnie (August 3, 2016). "Bitcoin security breaches raise questions about digital currency's future". Christian Science Monitor. Archived from the original on May 28, 2017.
  3. ↑ "Best Crypto Exchanges For Australians In 2023". Forbes Advisor Australia. June 5, 2023. Retrieved June 5, 2023.
  4. 1 2 "Bitfinex Trading Volume, Stats & News". Forbes. April 24, 2023. Retrieved April 24, 2023.
  5. ↑ "Best Crypto Exchanges For Australians In 2023". Forbes Advisor Australia. April 11, 2023. Retrieved April 24, 2023.
  6. ↑ "Bitcoin security breaches raise questions about digital currency's future". Christian Science Monitor. Retrieved February 6, 2023.
  7. ↑ Baraniuk, Chris (August 8, 2016). "Bitcoin users 'must pay' for lost coins". BBC News. Archived from the original on November 5, 2017. Retrieved November 23, 2017.
  8. ↑ Popper, Nathaniel (November 21, 2017). "Warning Signs About Another Giant Bitcoin Exchange". The New York Times. ISSN 0362-4331. Retrieved October 14, 2021.
  9. ↑ "CFTC Orders Bitcoin Exchange Bitfinex to Pay $75,000 for Offering Illegal Off-Exchange Financed Retail Commodity Transactions and Failing to Register as a Futures Commission Merchant". Commodity Futures Trading Commission. June 2, 2016. Archived from the original on June 20, 2018. Retrieved June 4, 2018.
  10. ↑ "Bitfinex comes back from $69 million bitcoin heist". May 21, 2017. Archived from the original on May 22, 2017.
  11. 1 2 Tsang, Amie (August 3, 2016). "Bitcoin Plunges After Hacking of Exchange in Hong Kong". The New York Times. Archived from the original on May 18, 2017.
  12. ↑ "Bitcoin Worth $72M Was Stolen in Bitfinex Exchange Hack in Hong Kong". Fortune. Archived from the original on November 20, 2016. Retrieved October 26, 2016.
  13. ↑ Baldwin, Clare (August 6, 2016). "Bitfinex exchange customers to get 36 percent haircut, debt token". Reuters. Archived from the original on March 16, 2019. Retrieved June 20, 2018.
  14. ↑ Kharif, Olga (February 8, 2022). "Bitfinex Cryptocurrency Linked to 2016 Hack Surges 59% After Fund Recovery". Bloomberg. Retrieved March 20, 2023.
  15. ↑ "Bitcoin worth $72 million stolen from Bitfinex exchange in Hong Kong". Reuters. August 3, 2016. Retrieved October 14, 2021.
  16. ↑ Mozée, Carla (February 9, 2022). "US stocks extend rally into second day with Fed official seeing the US at the 'cusp' of easing inflation". Markets Insider. Retrieved March 20, 2023.
  17. ↑ Barrett, Devlin (February 8, 2022). "Feds arrest couple, seize $3.6 billion in hacked bitcoin funds". The Washington Post.
  18. 1 2 Lyngaas, Sean (February 8, 2022). "Feds arrest a New York couple and seize $3.6 billion in stolen cryptocurrency". CNN News. p. 1. Retrieved February 9, 2022.
  19. ↑ Farrer, Martin (February 10, 2022). "'Sexy horror comedy': Bitcoin laundering suspect is also 'raunchy rapper' Razzlekhan". The Guardian News. p. 1. Retrieved February 10, 2022.
  20. ↑ Cohen, Luc (July 21, 2023). "Crypto rapper 'Razzlekhan,' husband reach plea deal over Bitfinex hack laundering" – via www.reuters.com.
  21. ↑ Shanahan, Ed (July 21, 2023). "2 Charged in Plot to Launder Billions in Cryptocurrency Reach Plea Deal" – via NYTimes.com.
  22. ↑ Forkin, Dan Mangan, Jim (July 21, 2023). "'Crypto Couple' appear set to plead guilty in bitcoin hack money laundering case". CNBC.{{cite web}}: CS1 maint: multiple names: authors list (link)
  23. 1 2 3 Dan Mangan, Eamon Javers (August 3, 2023). "Bitcoin launderer pleads guilty, admits to massive Bitfinex hack". CNBC. Retrieved September 26, 2023.
  24. ↑ Cohen, Luc (August 3, 2023). "Buried gold, burning trash: US couple admits to hiding hacked crypto". Reuters. Retrieved September 26, 2023.
  25. ↑ Willmer, Sabrina (August 3, 2023). "Bitfinex Hacker, Rapper Wife Plead Guilty in Crypto Heist Money Laundering". Bloomberg.com. Retrieved September 26, 2023.
  26. ↑ "IRS Statement — IRS Commissioner Charles Rettig's final message". Internal Revenue Service. Retrieved February 6, 2023.
  27. ↑ "Crypto Exchange Bitfinex Says $315,000 From 2016 Hack Recovered". July 6, 2023 – via www.bloomberg.com.
  28. ↑ Kaminska, Izabella (April 26, 2019). "We all become MF Global eventually, Tether edition". Financial Times. Archived from the original on April 27, 2019. Retrieved May 20, 2019.
  29. ↑ Lee, Timothy B. (April 29, 2019). "The leading "stablecoin" is no longer backed by $1 for every coin". Ars Technica. Archived from the original on May 10, 2019. Retrieved May 20, 2019.
  30. ↑ Vigna, Paul (May 17, 2019). "Lack of Banking Options a Big Problem for Crypto Businesses". Wall Street Journal. Archived from the original on May 21, 2019. Retrieved May 20, 2019.
  31. ↑ Popper, Nathaniel (June 13, 2018). "Bitcoin's Price Was Artificially Inflated Last Year, Researchers Say". New York Times. Archived from the original on June 13, 2018. Retrieved June 13, 2018.
  32. ↑ Kharif, Olga (February 8, 2022). "Bitfinex Cryptocurrency Linked to 2016 Hack Surges 59% After Fund Recovery". Bloomberg.com. Retrieved April 24, 2023.
  33. 1 2 3 "Tether Theft Isn't the First Controversy for Cryptocurrency Firm". Bloomberg.com. November 21, 2017. Archived from the original on November 22, 2017. Retrieved November 23, 2017.
  34. 1 2 Popper, Nathaniel (November 21, 2017). "Warning Signs About Another Giant Bitcoin Exchange". The New York Times. Archived from the original on November 22, 2017. Retrieved November 23, 2017.
  35. ↑ Nathaniel, Popper (November 21, 2017). "Warning Signs About Another Giant Bitcoin Exchange". New York Times. Archived from the original on November 22, 2017. Retrieved June 4, 2018.
  36. ↑ Katz, Lilly (May 31, 2018). "Bittrex Gets Bank Agreement to Help You Buy Bitcoin With Dollars". Bloomberg. Archived from the original on May 31, 2018. Retrieved June 4, 2018.
  37. ↑ Leising, Matthew; Rivera, Yalixa (October 1, 2018). "Puerto Rico's Noble Bank Seeks Sale Amid Crypto Slide". Bloomberg. Archived from the original on October 3, 2018. Retrieved October 18, 2018.
  38. 1 2 Irrera, Anna (June 22, 2018). "Bitfinex chief strategy officer departs". Reuters. Archived from the original on June 24, 2018. Retrieved June 23, 2018.
  39. ↑ Kharif, Olga; Leising, Matthew (October 17, 2018). "Bitcoin Trades at $300 Premium on Controversial Crypto Exchange". Bloomberg. Archived from the original on October 18, 2018. Retrieved October 18, 2018.
  40. ↑ Frankenfield, Jake (May 4, 2018). "Tether (USDT): Meaning and Uses for Tethering Crypto Explained". Investopedia. Retrieved April 24, 2023.
  41. 1 2 "Open-source wants to eat the internet". POLITICO. May 22, 2023. Retrieved June 5, 2023.
  42. ↑ "In the Matter of the Inquiry by LETITIA JAMES. : Attorney General of the State of New York". Supreme Court of the State of New York County of New York. Archived from the original on May 1, 2019. Retrieved May 22, 2019.
  43. 1 2 3 Larson, Erik; Leising, Matthew; Kharif, Olga (April 26, 2019). "Crypto Market Roiled by New Allegations Against Tether, Bitfinex". Bloomberg. Archived from the original on October 14, 2020. Retrieved May 5, 2019.
  44. 1 2 Robinson, Matt; Kharif, Olga; Leising, Matthew (May 3, 2019). "Ex-NFL Owner Said to Be Tied to $850 Million Crypto Mystery". Bloomberg. Archived from the original on May 5, 2019. Retrieved May 5, 2019.
  45. ↑ Kharif, Olga (May 9, 2019). "Beleaguered Bitfinex Says Its Crypto Exchange Turns 97% Profit". Bloomberg. Archived from the original on May 11, 2019. Retrieved May 11, 2019.
  46. ↑ Lyons, Kim (October 15, 2021). "Tether will pay $41 million over "misleading" claims it was fully backed by US dollars". The Verge. Retrieved October 22, 2021.
  47. ↑ Spadafora, Anthony (March 4, 2021). "Bitfinex launches system for contactless crypto payments". TechRadar. Retrieved March 20, 2023.
  48. ↑ Mehta, Ivan (June 9, 2021). "Kraken and Bitfinex are reportedly exploring ways to enter India". TNW. Retrieved March 20, 2023.
  49. ↑ Kharif, Olga (September 14, 2022). "Crypto Firms Prepare to Pause Activity During Ethereum 'Merge'". Bloomberg. Retrieved March 20, 2023.
  50. ↑ Engler, s (May 24, 2023). "Bitfinex Invests in Chilean Crypto Exchange OrionX to Expand Presence in Latin America - Currency News - Financial and Business News". markets.businessinsider.com. Retrieved June 5, 2023.
  51. ↑ "Bitfinex Expects El Salvador Volcano Token Issuance This Year". Bloomberg. January 27, 2023. Retrieved February 6, 2023.
  52. ↑ "Bitfinex Invests in Chilean Crypto Exchange OrionX to Expand Presence in Latin America". Yahoo Finance. May 24, 2023.
  53. ↑ McDonald, Michael (April 11, 2023). "Crypto Exchange Bitfinex Gets License to Operate in El Salvador". Bloomberg Industry Group News. Retrieved April 24, 2023.
  54. ↑ Oladipupo, Solomon (April 11, 2023). "Bitfinex Becomes First Licensed DASP in El Salvador". Finance Magnates. Retrieved April 24, 2023.
  55. ↑ Castro, Maolis (May 24, 2023). "Bitfinex, de los dueños de Tether, invierte en el exchange cripto chileno Orionx". Bloomberg Línea (in Spanish). Retrieved June 5, 2023.
  56. ↑ "Bitfinex Introduces P2P Trading Platform In Venezuela, Argentina, And Colombia". Forbes India. Retrieved July 26, 2023.
  57. ↑ "Crypto-currency company reports $31m raid". BBC News. November 21, 2017. Archived from the original on November 22, 2017. Retrieved November 23, 2017.
  58. ↑ Browne, Ryan (February 23, 2021). "Cryptocurrency firms Tether and Bitfinex agree to pay $18.5 million fine to end New York probe". CNBC. Retrieved December 22, 2021.
  59. ↑ "Bitfinex Settles New York Probe Into Tether, Hiding Losses," Bloomberg, February 23, 2021.
  60. ↑ "Bitfinex Says It Repaid Tether for $550M Loan at Center of NYAG Probe". nasdaq.com. February 5, 2021. Archived from the original on February 6, 2021.
  61. ↑ Osorio, Nica (August 7, 2023). "Bitfinex, Tether Win Big In US Court After Judge Dismisses Class Action Lawsuit". International Business Times. Retrieved September 26, 2023.
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