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Old 04-25-2019, 08:44 PM   #504
chemgear
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http://fortune.com/2019/04/25/bitfinex-tether-bitcoin/

The cryptocurrency markets buckled on Thursday evening after New York’s attorney general accused the owners of a prominent exchange, Bitfinex, of using illicit transactions to mask $850 million in missing funds.

According to a 23-page legal filing, Bitfinex raided the reserves of a so-called stablecoin called Tether—a digital currency purportedly backed one-to-one by U.S. dollars—in order to pay out customers demanding withdrawals from the exchange.

The news caused Bitcoin to fall nearly 6% to around $5,100, and raise questions about the viability of Tether, which many investors use as a surrogate for dollars to move in and out of different cryptocurrencies.

The attorney general’s filing says the funds raided from Tether amount to $850 million. According to Chad Cascarilla, who is head of a company called Paxos that makes a rival stablecoin, that figure would account for at least 27% in Tether’s dollar reserves.

The filing also reproduces messages written by a Bitfinex executive last August, which plead for capital from a Panamanian payment processor to which it had transferred funds.

“The situation looks bad. We have more than 500 withdrawals pending and they keep coming in … [T]oo much money is parked with you and we are currently walking on a very thin crust of ice,” reads a message from a Bitfinex executive who used the name “Merlin.”

Merlin also warns his contact, “Oz,” that the situation posed a grave threat to the larger crypto industry and that Bitcoin “could tank” to below $1,000 if they didn’t act quickly.

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