Bitcoin exchange sucks off 900 million dollars

For the first time, the US judiciary provides evidence that the Bitcoin hype may not be right: Billions of dollars in reserves, which serve as collateral for the crypto rates, have apparently been embezzled.

BTC is used for a lot of different things nowadays, also for gambling – f1mania.lance.com.br. Every monetary system in the world is based on the confidence that there are real values behind the currency. If users lose faith in the fact that a means of payment is covered by countervalues, the financial system threatens to collapse. According to US investigators, the security reserves of the digital reserve currency are being systematically plundered.

The focus of the investigation is the crypto currency tether: it is a kind of digital gold standard on which Bitcoin and the entire crypto market are based. The makers of Tether promised for a long time that you can exchange any of the digital coins for a dollar at any time, so the cyber money is tied to real money. Hence the name: Tether. Exactly this promise also stabilizes the Bitcoin, because its buyers have the security that they can exchange the crypto currency for tether – and thus potentially also for dollars. A large part of the worldwide Bitcoin trade is therefore conducted in tether.

But now the New York Attorney General claims that the makers of Tether are secretly tapping the reserves of the “Stablecoin”: The operators of the Bitfinex crypto exchange, who are also behind Tether, have withdrawn money from the dollar holdings of Tether in order to cover up a loss of 850 million dollars, Letitia James announced at a press conference. The loss had never been disclosed to the investors of the stock exchange.

At least 700 million dollars had already flowed out of Tether‘s cash reserves. Investigators have now obtained a restraining order prohibiting Hong Kong operating companies from transferring more money from the tether reserves to Bitfinex accounts and forcing them to disclose documents and information they have been refusing since November.

The loss of investor confidence is directly reflected in the Bitcoin rate: After the accusations became known, it plummeted by more than six percent. Also on Friday it continues its descent and lies up to ten per cent in the minus. The accusations threaten nothing less than the reputation of cyber money itself: if something were to be wrong with Tether, it could destabilize the entire crypto trade.

“Black box” for massive cover-up

With a number of questionable transactions, the bosses of the Bitfinex exchange, who also operate Tether, have themselves granted themselves access to the Tether reserves of up to 900 million dollars, the investigators claim. “These transactions treat Tether’s cash reserves as Bitfinex’s black box and are used to disguise Bitfinex’s massive unpublished losses and inability to meet customer withdrawals,” the New York Attorney General’s office said.
*Privacy

Bitfinex rejects the accusations: they are “made with malice” and “interspersed with false allegations”, the stock exchange announced in a statement on its website. “Both Bitfinex and Tether are financially stable – period.” They will defend themselves against the “blatant transgression” of the General Prosecutor’s Office by all means and “vigorously oppose” the accusations.

  • According to the Attorney General’s Office, the problems began in mid-2018 when Bitfinex “transferred $850 million to an obscure payment processor called Crypto Capital Corp. in Panama to process customer withdrawals without a written contract or reinsurance”.
  • The company simply withheld the money. To compensate for the loss, Bitfinex then tapped into Tether’s dollar reserves. Bitfinex, on the other hand, says that the money is not lost, but “secured”.
  • They are working on getting it back.

The revelations reinforce the long-held suspicion of many crypto critics that Tether’s reserve base does not really exist. The makers of the digital currency have never published a certified report on their dollar holdings. Only in March did they weaken their central promise of stability: Instead of earlier assertions that coins were fully covered with money, the Tether website now says that the cyber currency is secured with reserves of money, cash equivalents and other equivalents.

Experts like US star economist Nouriel Roubini have long suspected that cyber-money is nothing more than a gigantic billion-dollar fraud that artificially pushed the Bitcoin exchange rate.