Ever since last spring, when Wells Fargo severed its relationship with cryptocurrency exchange Bitfinex, questions have swirled about the exchange’s business dealings – and even its solvency. Last fall, the venerable New York Times published an article entitled “Warning Signs About Another Giant Bitcoin Exchange.”
The Times points out that Bitfinex is “an opaque operation” that doesn’t readily provide information on its directors or owners. The company is incorporated in the British Virgin Islands but its actual physical location is Hong Kong. It has a close relationship with another mysterious company – Tether – in that both companies share the same owners.
Tether also had its banking relationship severed when Wells Fargo cut off Bitfinex, yet the company continues to issue billions of dollars in tokens supposedly backed by US dollars. Nobody is quite sure what bank account those dollars are stored in, due to the company’s banking troubles.
In April, Tether reported on its blog:
Since April 18, 2017, all incoming international wires to Tether have been blocked and refused by our Taiwanese banks. As such, we do not expect the supply of tethers to increase substantially until these constraints have been lifted.
Yet since then, the supply of Tether tokens has increased by over a billion. That certainly seems like a heck of an increase for a company that admitted it had no viable way of accepting deposits. In the same blog post, Tether also wrote:
For customers with bank accounts outside of Taiwan, we are diligently pursuing alternate funding channels. New banking corridors are in the process of being established.
Now, Dutch bank ING has confirmed that Bitfinex is a customer. It remains unclear how deep the banking relationship is - for instance, whether ING is the bank holding billions of dollars that supposedly back Tether’s tokens. ING is mum on the matter, saying only:
With regards to companies that are active in the crypto market, we are very conservative.
Following ING’s revelation, a Dutch MP has asked the country’s finance minister for clarification on the nature of the bank’s relationship to Bitfinex.
The US government issued subpoenas to both Bitfinex and Tether in December, but it is unclear what documents the government was requesting. Tether also had to fight off a hacker recently who created $30 mln in new Tether tokens out of thin air. The company was able to reverse the transaction. Finally, the company has been challenged for months by a dedicated and thorough critic on Medium known by the handle “Bitfinex’ed.” The company apparently had enough late last year, and threatened legal action against the anonymous blogger. The threats did not seem to deter him, however.