The BFX Tokens of Bitcoin Exchange Bitfinex Were Allegedly Paid Back Through Accounting Tricks – Trustnodes

The BFX Tokens of Bitcoin Exchange Bitfinex Were Allegedly Paid Back Through Accounting Tricks

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Following an alleged hack of around 120,000 bitcoins, now worth around $160 million, Bitfinex announced they were to slowly pay them back through profits by converting the 120,000 bitcoins into a BFX token which were to gradually be redeemed.

Around the end of January, just five months after they were hacked back in August, Bitfinex stated half of the tokens had been redeemed. A month or two latter they announced all of the tokens had been redeemed.

Considering the stupendous amount in question, many were wondering where the funds came from to so quickly pay back such huge sums. When Bitfinex was asked, they said it was through token buybacks and conversion to equity in Bitfinex’s shareholdings.

Today, a twitter account that calls itself “Bitfinex Whistleblower,” has publicly stated the funds were redeemed through an accounting gimmick. Bitfinex operates Tether, a currency that is meant to be pegged to the dollar at a 1:1 value and on the surface appears to be backed by dollars. However, according to Tether’s terms and conditions:

“Tethers are not money and are not monetary instruments. They are also not stored value or currency. 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.”

Those terms probably wouldn’t fly in a court of law since Tether’s website loudly says on its front-page that “every tether is always backed 1-to-1, by traditional currency held in our reserves. So 1 USD₮ is always equivalent to 1 USD.”

However, the whistleblower says Bitfinex has increased the supply of tethers from 6 million to 65 million and have used this 65 million to pay back BFX tokens, shifting the debt from them to the tether holders, according to the whistle blower, who further says:

“Since tethers are not legally redeemable per their TOS, they can choose to redeem these at their leisure or simply not at all. USDT/Tether are not legally their liabilities per the terms.”

Bitfinex is currently undergoing through some banking difficulties after being cut off from Wells Fargo, forcing them to stop fiat deposits and withdrawals. Bitcoin trades at around $100 premium on the exchange, with most other digital currencies trading at a premium too.

Tether’s price has fallen, diverging from its USD peg.

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