The Mystery of The Bitfinex/Tether bank, and why this is suspicious

Transparency. You keep using that word. It does not mean what you think it means.
Bank names AND account numbers! Not private. Not Super-Secret.
Tether converted your deposits into “Secret Swiss Accounts” you can’t withdraw from.
  1. Practically nobody can withdraw USD from Bitfinex.
  2. Practically nobody can withdraw USD from Tether.
  3. If you don’t know what jurisdiction your money is in, or what bank it is in, suing them is pointless. You have no legal recourse to challenge their abomination of a Terms of Service that claims Tethers to be non-redeemable. (As I have pointed out before)

Why is who Tether banks with any of your business?

In order for ordinary customers to legitimately use Bitfinex, or Tether, in the course of using these services eventually they have to tell you the banking information, or this information is exposed to you when they send you your money.

Why this is suspicious

Problem 1.

Tether banking crisis started late March, with lawsuit on April 5th and retracted a week later.
  1. Bitfinex owns a majority of Tether (Here’s Bitfinex saying so!)
  2. Tether ‘client’ deposits $10,000,000 USD to Tethers super-secret private bank account, and gets 10,000,000 Tether Tokens.
  3. Tether now has $10,000,000 in bank account.
  4. Bitfinex, as majority shareholder in Tether in theory has access to those funds, or can simply ‘borrow’ them from Tether, or Bitfinex could borrow money from their bank, which in turn their bank uses the funds from Tether, and this is a 0 risk loan to the bank, as the money stays put.
  5. Bitfinex puts say… 55% of that USD (which hardly anybody can withdraw anyway), for margin lending on Bitfinex to generate interest from it.
  6. The money in reality stays in Tethers bank account untouched, but there is now more than one claim for each of those dollars. One for the circulating tether, and one in a margin position on Bitfinex. This works, as long as too many people don’t try to withdraw USD, which Bitfinex ensures by only allowing a small group of elites to withdraw funds.
  7. Bonus! That same Dollar can be loaned out multiple times on Bitfinex. For example, Margin buy Bitcoin with $100,000 USD, BTC seller has USD now, BTC Seller moves USD funds to his funding wallet, someone else margin buys Bitcoin after borrowing from him, Seller moves funds to his funding wallet, rinse and repeat.
Also notice short duration of loans, only 2 days.
If the shoe fits, you must wear it.

The transparency of blockchain companies needs to exceed non-blockchain companies

The whole point of Bitcoin and Crypto-currencies, is full transparency. Not secrecy and hiding important information and releasing misleading reports.

Don’t forget…

Bitfinex and Tether are not in this mess because “banks hate bitcoin” or “banks attacking Bitcoin”.


There is precedent for what Tether is doing.

Notice the astronomical rise in shorts without the price falling, and 24,000 BTC short INSTANTLY covered.



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Blog for @Bitfinexed on Twitter. Exposing possible fraud by largest Bitcoin exchange, Bitfinex/Tether