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Bitcoin plunged after a major crypto exchange was accused of using client money to hide $850 million of missing cash (BTC)

source AMC screencap Bitcoin plunged after cryptocurrency exchange Bitfinex drained at least $700 million from the reserves backing its digital coin, Tether, to cover up $850 million in missing funds, according to a lawsuit filed by the New York Attorney General. The attorney general’s office accused it of “ongoing fraud” and engaging in “undisclosed, conflicted…

Bitcoin plunged after a major crypto exchange was accused of using client money to hide $850 million of missing cash (BTC)

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AMC screencap
  • Bitcoin plunged after cryptocurrency exchange Bitfinex drained at least $700 million from the reserves backing its digital coin, Tether, to cover up $850 million in missing funds, according to a lawsuit filed by the New York Attorney General.
  • The attorney general’s office accused it of “ongoing fraud” and engaging in “undisclosed, conflicted transactions to cover Bitfinex’s losses by transferring money out of Tether reserve funds.”
  • Bitfinex said the claims were “written in bad faith and riddled with false assertions” and pledged to fight the order.
  • Watch Bitcoin trade live.

Bitcoin plunged as much as 5% after a major cryptocurrency was accused of pulling $700 million from the reserves backing its digital coin to cover up $850 million in missing funds.

According to a lawsuit filed by the New York Attorney General, Hong Kong-based iFinex, which operates the Bitfinex exchange and popular cryptocurrency Tether, has been mixing client funds.

The attorney general’s office alleges that iFinex combined client funds with its own capital to hide the fact that cash went missing last year, which was never publicly disclosed.

Crypto markets lost as much as $10 billion late Thursday, CoinDesk found.

Bitcoin

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Markets Insider

The attorney general’s office is working to expose “ongoing fraud being carried out by Bitfinex and Tether,” according to the lawsuit.

It accuses the pair of engaging in “undisclosed, conflicted transactions to cover Bitfinex’s losses by transferring money out of Tether reserve funds.”

Bitfinex transferred $850 million to Panama-based payment processor Crypto Capital to handle customer withdrawals last year, according to the lawsuit.

The company began having “extreme difficulty” fulfilling client withdrawal requests by the middle of 2018, as Crypto Capital refused to process requests and failed to return any funds to Bitfinex, the lawsuit states. To mask the shortfall, Bitfinex tapped Tether’s reserves to the tune of $700 million.

The attorney general’s office have obtained a court order instructing iFinex to cease transfers from Tether’s reserves to Bitfinex’s accounts, suspend dividends and other payouts to executives, and hand over documents, according to the lawsuit.

Bitfinex said the lawsuit’s claims were “written in bad faith and riddled with false assertions” and pledged to fight the order, in a statement on its website. “Both Bitfinex and Tether are financially strong – full stop,” it added.

The company also said the $850 million wasn’t lost by Crypto Capital but had been “seized and safeguarded,” and it was working to reclaim the funds.

“The New York Attorney General’s office should focus its efforts on trying to aid and support our recovery efforts,” it added.

Tether’s market value has soared from $10 million at the start of 2017 to $2.8 billion, according to the Wall Street Journal. About 80% of all bitcoin trading is done in Tether, according to data from CryptoCompare cited by the Journal.

The attorney general’s office made other notable claims in its lawsuit. It accused iFinex of failing to sign a contract or formal agreement with Crypto Capital, relying on payment processors owned by Bitfinex and Tether executives and other associates, and allowing several traders in New York and other states to continue using Bitfinex’s platform despite stating it would no longer serve US customers.

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Bitcoin Beats Other Cryptos in ‘Smarter’ Bull Market, Says Billionaire Investor

Bitcoin Beats Other Cryptos in ‘Smarter’ Bull Market, Says Billionaire Investor

Bitcoin Beats Other Cryptos in ‘Smarter’ Bull Market, Says Billionaire InvestorBitcoin’s dominance will only be more pronounced in this bull market and that’ll show in its value, according to Mike Novogratz. | Source: ShutterstockBy CCN: Mike Novogratz, the billionaire CEO of Galaxy Capital and a former hedge fund manager at Fortress Investment Group, believes alternative cryptocurrencies, or altcoins, will be outperformed by bitcoin in the bull market.Not this time. Market getting smarter. $btc will outperform.— Michael Novogratz (@novogratz) May 19, 2019The statement of Novogratz comes after the bitcoin price risen by more than 115 percent year-to-date against the U.S. dollar, leading the crypto market to add $124 billion to its valuation.Will bitcoin continue to outperform altcoins?Historically, altcoins have relied on the price trend of bitcoin and have rarely demonstrated independent price movements in extended time frames.Altcoins typically surge in value when the bitcoin price shows stability at a tight price range, leaving investors to take high-risk and high-return options over the dominant cryptocurrency.The optimism towards bitcoin, despite the emergence of sophisticated altcoins, is well founded due to the involvement of major financial institutions in the likes of Fidelity and TD Ameritrade building infrastructure on top of bitcoin.Fidelity and ICE, the parent company of the New York Stock Exchange, are initially launching custodial services for bitcoin, targeting institutional investors.According to TD Ameritrade’s executive vice president Steven Quirk, tens of thousands of clients at the brokerage already trade crypto assets in some capacity.But, traders suggest that if the sentiment around the crypto market remains overwhelmingly positive, investors will eventually explore alternative opportunities for high-return trades, which then may fuel a rally for altcoins.One cryptocurrency trader said that bitcoin is likely to climb further throughout 2019, triggering a healthy market for altcoins:The rest of this year will be characterized by rapid BTC advances, healthy corrections and periods of sideways price action, when altcoins will fly. Put that nonsense rhetoric about waiting for capitulation and still not making our bear market lows away. Wrong cycle.Full on degen altcoin season still on track for June. Next few weeks, as BTC finds a range, we’ll continue to see the popular altcoins bounce back 1st. In June, all altcoins across the board will bounce back hard. More disbelief on its way.The concern of some investors like Novogratz on the prospect of a booming market for altcoins is that many retail investors were hurt in the 2017 bull market taking high-risk trades, trading against stable assets like bitcoin.As the market matures and as investors in the market become smarter, Novogratz indicated that the appetite for altcoins could decline.The crypto market has added more than $100 billion to its valuation year-to-date (source: coinmarketcap.com)Similarly, Jeff Sprecher, the chairman of the New York Stock Exchange, said in November 2018:Somehow bitcoin has lived in a swamp and survived. There are thousands of other tokens that you could argue are better but yet bitcoin continues to survive, thrive and attract attention.At the time, Sprecher emphasized that Bakkt, a futures market operator created by NYSE’s parent company ICE, will focus on building a regulated infrastructure for bitcoin first ahead of other assets.Sentiment is generally positiveOn May 17, as CCN reported, the bitcoin price plummeted by 18 percent within hours following an unexpected 5,000 BTC sell order on Bitstamp that led prices of bitcoin and ethereum to crash on BitMEX.The market absorbed the abrupt decline in the bitcoin price fairly well, indicating that the confidence in the near-term price trend of crypto assets remains strong.While investors have cautioned that bitcoin has shown oversold conditions in recent weeks as it surpassed key resistance levels, the momentum of the asset could prevent it facing a large correction some expect would occur in the near-term. About The AuthorJoseph YoungHong Kong-Based Finance and Cryptocurrency Analyst. Contributing regularly to CCN and Hacked. Providing unique insights into the crypto and fintech space since 2012.This article was edited by Samburaj Das.
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Bitcoin’s price has pumped beyond its ‘intrinsic value,’ JPMorgan says

Bitcoin’s price has pumped beyond its ‘intrinsic value,’ JPMorgan says

Banking behemoth JP Morgan Chase & Co. has taken another shot at Bitcoin, BTC claiming the cryptocurrency‘s latest rally has pushed its price beyond its “intrinsic value.”
“Over the past few days, the actual price has moved sharply over marginal cost,” JPMorgan analysts wrote in a note obtained by Bloomberg. “This divergence between actual and intrinsic values carries some echoes of the spike higher in late 2017, and at the time this divergence was resolved mostly by a reduction in actual prices.”

To come to this conclusion, the JP Morgan team treated Bitcoin as a commodity, calculating its “cost of production” based on a number of factors, including estimated computational power, electricity expense, and hardware energy efficiency.
“Defining an intrinsic or fair value for any cryptocurrency is clearly challenging,” the analysts continued. “Indeed, views range from some researchers arguing that it has no fundamental value, to others estimating fair values well in excess of current prices.”

Bitcoin‘s price briefly dropped from almost $8,000 to $7,050 on May 17, after $250 million of long positions got liquidated on BitMEX. Since then, BTC has surged back to $7,893 at the time of writing.
By now, JP Morgan has made a habit out of thrashing Bitcoin and cryptocurrencies. Back in 2017, CEO Jamie Dimon called the currency a “fraud” – a statement he later softened, suggesting he simply doesn’t care about Bitcoin. Since then, JP Morgan launched its own blockchain-based “digital currency,” which was neither a cryptocurrency, nor a stablecoin.

Published May 20, 2019 — 11:54 UTC

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