Bitfinex, the world’s largest Bitcoin exchange by daily trading volume, has vowed to pursue legal action against critics including the anonymous blogger “Bitfinex’ed.”
Stuard Hoegner, Bitfinex’s in-house counsel, stated:
“To date, every claim made by these bad actors has been patently false and made simply to agitate the cryptocurrency ecosystem. As a result, Bitfinex has decided to assert all of its legal rights and remedies against this agitator and his associates.”
Kyle Samani, a partner at Multicoin Capital, stated that Bitfinex had made a critical mistake by initiating a lawsuit against Bitfinex’ed and other potential “bad actors” in the cryptocurrency space.
Over the past few months, Bitfinex’s involvement with Tether, the US dollar-backed cryptocurrency, has been questioned, given that a long-promised third party audit on the USD reserve of Tether was never performed. Critics such as Bitfinex’ed claimed that not all of the Tether issued are backed by US dollars. Tether (the company) shares many of the same owners as Bitfinex.
Charlie Lee, the creator of Litecoin and former executive at Coinbase, also urged Bitfinex to conduct a third party audit on Tether, to put an end to the controversy.
There’s a fear going on that the recent price rise was helped by printing of USDT (Tether) that is not backed by USD in a bank account.
— Charlie Lee [LTC] (@SatoshiLite) November 30, 2017
A third party audit would be beneficial for both Bitfinex and the cryptocurrency sector, as it would calm many investors who fear that Bitcoin’s price is being manipulated. It would also reassure holders of Tether that the cryptocurrency is backed by a USD reserve.
However, as Samani noted, instead of performing a third party audit, Bitfinex chose to pursue legal action against its critics.
As a crypto exchange, when you’re accused of being a fraud, you have 2 choices:1) produce bulletproof audits and *demonstrate* (not just say) a commitment to transparency
2) threaten your accuser with litigation@bitfinex chose #2
— Kyle Samani (@KyleSamani) December 5, 2017
Reserve of ether
Several analysts and experts have recently questioned the USD reserve of Tether. Tim Swanson, the founder at OfNumbers and a risk analyst for Blockchain firms, stated that a serious problem could emerge in the short-term if Tether is not backed by USD by a 1:1 ratio.
“Is there anything backing this? If these aren’t backed 1-to-1, then what is the contagion risk if one of these exchanges goes down?”
Given that Bitfinex remains as the largest cryptocurrency exchange in the global market and Tether has evolved into a $813 million cryptocurrency, Bitfinex and Tether should conduct a third party audit to prove their solvency in the upcoming months. Failure to do so will continue to ignite more controversy within the global cryptocurrency community, which is not beneficial for any party involved…