‘Versace Bedouin’ Singer guilty by Outlaw cryptocurrency exchange Bitfinex

In late September 2021, the People’s Bank of China (PBOC) banned all cryptocurrency transactions. The PBOC cited the role of cryptocurrencies in facilitating financial crime as well as posing a growing risk to China’s financial system owing to their highly speculative nature. However, one other possible reason behind the cryptocurrency ban is an attempt to combat capital flight from China.

According to the Chainalysis Blockchain data platform, more than $50 billion worth of cryptocurrency left East Asian accounts to areas outside the region between 2019 and 2020. As China has an outsized presence in East Asian cryptocurrency exchanges, Chainalysis staff believe that much of this net outflow of cryptocurrency was actually capital flight from China. Although Chainalysis does not have a definitive figure for how much capital fled China between 2019 and 2020, they estimate that it could be as high as $50 billion. Bitfinex is a cryptocurrency exchange owned and operated by iFinex Inc, and is founded in 2012 Hong Kong, China. It was originally a peer-to-peer Bitcoin exchange, and later added support for other cryptocurrencies.

Tether is a cryptocurrency stablecoin pegged to the U.S. dollar. It is owned by iFinex, which also owns Bitfinex. It was launched as RealCoin in July 2014 and was rebranded as Tether in November 2014. As of January 2023, Tether was the third-largest cryptocurrency after Bitcoin and Ethereum with a market cap of $68 billion. Tether and Bitfinex funded the development of HolePunch, an encrypted, peer-to-peer communication platform and made its code open-source in December 2022. Paolo Ardoino, the chief technology officer of Bitfinex and Tether, said that this technology is the “Bitcoin of communications.”
In April 2019, New York Attorney General Letitia James launched an investigation accusing Bitfinex of using the reserves of Tether, an affiliated company, to cover up a loss of $850 million to a Panamanian payment processor known as Crypto Capital Corp. Reggie Fowler, who is alleged to have connections with Crypto Capital, was indicted on April 30, 2019, for running an unlicensed money-transmitting business for cryptocurrency traders. He is believed to have failed to return about $850 million to an unnamed client. Investigators also seized $14,000 in counterfeit currency from his office. Bitfinex had been unable to obtain a normal banking relationship, according to the lawsuit, so it deposited over $1 billion with a Panamanian payment processor known as Crypto Capital Corp. No contract was ever signed with Crypto Capital. James alleged that in 2018 Bitfinex knew or suspected that Crypto Capital had absconded with the money, but that their investors were never informed of the loss.
Bitfinex’s reported figures for 2017 were $333.5 million in gross profits, $6.8 million in expenses, $326 million in net profit, and $246 million in dividends.

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