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

9 min readOct 2, 2017

Tether and Bitfinex have gone through great lengths to conceal who they are banking with, and what jurisdiction they are operating under.

Here’s a sample of a ‘report’ they published which was routinely called an “audit” by people who are doubting my claims (which remain backed by content on Tethers own website…)

Transparency. You keep using that word. It does not mean what you think it means.

Here’s a similar report they published early September. Notice anything different?

Bank names AND account numbers! Not private. Not Super-Secret.

While their original report showed the bank name, and even their account numbers (which isn’t private information for a money transmitter), their new report, in a goal to show good faith and be transparent, redacts that.

We also know where they banked previously because of their ill fated lawsuit against Wells Fargo (NOTE: All of this is public record)


In other-words, their updated ‘report’ contains even less information than the previous ‘report’.

Tether converted your deposits into “Secret Swiss Accounts” you can’t withdraw from.

Let me start with a few assertions:

  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)

It would be impossible for Bitfinex/Tether to keep their bank a secret unless the only people that can withdraw are closely associated with them.

The average Tether user is screwed.

Anyone buying Tethers on secondary markets, thinking they are backed, is screwed.

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.

If you are sending your money to someone which is in theory being held on your behalf, you have a right to know where that money is. If you are buying alleged claims against that money (such as buying a Tether), you have a right to know where that money actually sits. It’s not their money.

It’s your money, in theory.

Basically, you have a right to know what you are buying. Think of it as… due diligence. Crazy, right?

This information isn’t private, isn’t a security vulnerability (unless they are doing something illegal), and in the past, we knew who they banked with. Again, you had to know this in the past to use Bitfinex or Tether!

I have routinely been told “Deposits and Withdrawals work fine!”, yet nobody has provided any proof of this, not a single person who claims they withdrew money, will reveal what Tethers bank is, for ‘privacy’, but again, this information isn’t private.

Generally, when I ask for proof, this is what I get in response.

Why this is suspicious

Problem 1.

They are trying to hide from regulators, they may have received a significant sum of money from BTC-E, as BTC-E implemented Tether in the midst of their banking crisis. This could also be be their mystery investor.

Tether banking crisis started late March, with lawsuit on April 5th and retracted a week later.

Receiving money from BTC-E is automatic money laundering in my opinion, everyone knew BTC-E didn’t quite pass the smell test.

They know this, and it’s an indisputable fact that BTC-E money is now co-mingled with Tethers. This isn’t FUD. BTC-E had Tether withdrawals. BTC-E was shut down by the Feds. Tether has BTC-E money, and the Feds are likely looking for this money too.

And only Satoshi knows how many times that dirty money has changed hands internally in Tether.

Problem 2.

Their bank could be unaware of what they are doing, and if the bank figures it out, they’ll suspend the account. To avoid their account being shut down, they keep it to a small, exclusive club of people that can deposit and withdraw funds.

By keeping the amount of people depositing/withdrawing money to a small group of elites, they raise less eyebrows.

What this basically means is they cannot ever ‘fix’ withdrawals and deposits for 99.999% of customers, as that will start the problem all over again with their accounts getting shut down. I also want to point out they have not started banking in any other currency either, as they once planned to.

Also, Friedman LLP did not review their relationship with the bank. So we don’t know for sure if the bank is in the loop of their business practices. Likely, if the bank was in the loop and totally cool with it, they’d be able to properly handle deposits and withdrawals for everybody.

Not just a select few.

Problem 3.

They have good reason to fear their bank finding out what they’re really up to, as people have already been fired for misrepresenting Bitfinex’s accounts to banks compliance departments.


Which of course, Friedman LLP did not evaluate the agreements between their banks…

And remember, Friedman LLP also did not even establish whether Tether has access to the funds, or if the funds are committed for purposes other than Tether token redemptions.

Why is that important?

Think about this.

  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.

How does Tether make money? Simple, they loan out your money, or their bank does. Boom, fractional reserves. Let’s hope their bank is investing the money wisely…

Most margin lending positions on Bitfinex are single massive loan offers.

Also notice short duration of loans, only 2 days.

And you can’t ignore the fact that margin debt rises dramatically every time new Tethers get issued… a point I make out in one of my previous posts.

What’s most interesting is how they redacted information we already know. For example, their first bank account with $60 million is in the name of an individual for the benefit of Tether. Who might that be?

Let’s see…

If the shoe fits, you must wear it.

Of course, their lawyer! Which isn’t a big secret. So, the question remains, why redact it? I guess they redacted it for transparency…

Literally the first name I try fits perfectly in their little redaction box.

So much for a good faith effort.

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.

The goal of blockchain, and Bitcoin, is for more transparent markets. Not hiding things. Not redacting critical information.

Tether is holding the public’s money and is accountable to the public.

And right now, unless you’re in their ‘cool club’ you can’t actually withdraw your money from Tether, or Bitfinex.

The onus is on Tether to prove its own legitimacy.

Transparency is mandatory. Hiding information which isn’t private to begin with is unacceptable and simply breeds mistrust.

We know when Bitfinex gets Bitcoins, we know when they send Bitcoins.
We know when Tether issues Tethers.
We see every Tether transaction on the blockchain.
We see every Bitcoin transaction on the blockchain.

If Tether is a legitimate, on the up and up, ‘blockchain’ company, then they have nothing to fear by providing even just the name of their bank and jurisdiction.

They could set the standard for what a blockchain company that provides a token allegedly tied to fiat, should do. Unfortunately, they’re just spewing marketing and misleading information.

I also missed this bombshell, in my previous post regarding Tether.

What does this mean?

We have no idea if the money Tether shows was transferred in hours before their ‘report’.

Don’t forget…

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

Bitfinex and Tether are in this mess because they played shell games with banks for years and filed frivolous lawsuits and their past has caught up with them.

And well, here’s Phil Potter admitting this in an interview that WhalePool deleted.


There is precedent for what Tether is doing.

It’s called Liberty Reserve. And it will end the same way, with regulators shutting them down.

I will end with this, if only a select few traders can withdraw USD from Bitfinex and Tether, then the significant majority of the volume we see on Bitfinex, is going to be between a very small group of people.

Which raises the question if they could be wash trading among themselves, and here’s an example of such a trade.

This small group of people could be trading among themselves while taking positions on other exchanges, such as Bitmex, Bitstamp, etc, and literally moving the price anywhere they want without actually buying or selling anything on Bitfinex by just wash trading with each other.

I exposed this before in my ’Meet Spoofy’ Article post, showing a single entity wash trading 24,000 BTC, or at the time over 20% of all of the Bitcoins held on Bitfinex.

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

To me, Tethers release of this ‘report’ is them simply trying to buy time. People who disagree with me and come to the defense of Tether routinely, called it an “audit” and called me out for being “rekt”.

To Tethers credit, they themselves did not call it an audit, and Tether defenders had to backtrack on their “audit released, BITFINEXED PWNED LOL!”

But their redaction of the report, leads me to wonder if during their real ‘audit’, if they intend to continue to hide critical information.

Are they going to redact their real audits too? Should we really trust a redacted audit?

I would not accept a redacted audit as sufficient, and neither should anyone else.

I have been invited to come speak to Bitfinex on their TeamSpeak, but this report proves to me that would have been a waste of time.

They would not have answered any questions of substance.

Trade carefully.





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