The scandal around Bitfinex and Tether
The scandal around Bitfinex and Tether has begun in 2017. After multiple refutations, the companies finally admitted to have a common leadership. The crypto market’s attention got fixed on both companies after reports about Tether hack on November, 31. Tokens worth $31 million had been stolen by an unknown hacker and let to the mass accusation of unbacked token operations and stock exchange manipulations. A watchful user Bitfinex'ed, famous for criticizing the stock exchange, noticed a subtle detail that, according to him, confirms the companies' problems with law. He talks about the stock exchange's fellow worker and his Twitter profile, where, right after the above mentioned events and interviews, the symbol of warrant canary has disappeared. Its absence basically means "I can't talk and I can't explain why I must keep the silence". This tool is used in case of NDA (non-disclosure agreement). Thus, the canary allows a user to notify followers that something is going on, but, due to jurisdiction, he or she is not able to spread.
The day before in the interview with WhalePool, the profile's holder Chris Ellis told how exactly tokens were transferred from Tether to Bitfinex and how the facilities had been stolen. He mentions that only the hot wallet got hacked. The amount of Tether tokens is progressively growing, thus attracting lots of attention: since December, 17 2017 the balance increased from $1 to $2 billion. Tether is literally printing money from nothing, and none can stop them. Tethers aren’t a currency nor any kind of money. The actual price of them equals zero, but token users have no jurisdictional claims. Due to these obscure relations with laws, Tethers cannot be sold to users in USA. Five large stock exchanges use 1.5 billion tokens USDT. If Tether fails, they risk to deal with significant losses and may even fall. Sooner or later, the bubble will burst and tear the market with apart. The official website doesn’t provide any contacts, names, data other than “incorporated in Hongkong” and “have offices in the US on the East Coast”.
An independent audit would be definitely helpful in solving the conflict, but the companies constantly ignore all requires and refuse to carry one out. However, an audit was finally expected, but few days ago Tether tore the partnership with Friedman LLP apart, accusing it in protracting the process. Thus, the expected audit is being postponed again. So, does Tether have $2.5 billion? We wish we knew. Obviously, the swindle will fall as soon as they face real payments.
We can say that people standing behind Bitfinex and Tether are sharks in the shadow that don’t mind any ways of extracting money. Though their business is low-key, they play a significant role in the market. If you wonder, where do they work from — Virgin Islands in the Caribbean, that allows them to avoid financial laws in USA, EU or China without attracting attention of police and regulators. However, the main offices are in USA and Hong Kong, but nobody knows where precisely.
Working with Bitfinex and other stock exchanges that use USDT, be attentive and careful, even if their reputation seem spotless and conditions — more than attractive.