What the Bitfinex Tether Scandal means for Crypto

Faris Brni
Apr 29 · 4 min read

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Everybody heard of it. Bitfinex, one of the largest cryptocurrency exchanges in the world, could be involved in one of the biggest scandals in crypto history. It covered $850 Million loss with tether funds. The New York Attorney General’s (NYAG) office it filed a court order against iFinex Inc., the company behind Bitfinex and Tether. In this article, I will give my opinion on the circumstances and my assumptions of impact on the whole Crypto Market.

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The Problematic behind Bitfinex’s Tether

Investigations on Bitfinex are not new. Bitfinex is loved, but also very criticised for the creation of Tether (also USDT). On the one hand, we need Tether, we can always convert almost any cryptocurrency into it and since it’s backed by the USD 1-to-1 we always get the (almost) same amount of money we would get in USD.

Traders need Tether to be able to trade and of course, not everyone likes Traders and prefers to be a “Hodler” (a person that holds cryptocurrencies over a longer time), Traders are important for Crypto since they drive liquidity to it. Traditional traders coming from stock markets seeing cryptocurrencies as a legal and potential investment give stablecoins like Tether a right to exist. On the other hand, Tether is issued by a private company and not a decentralised committee. This private company never did an audit on Tether and the Twitter Personality Bitfinex’ed also claimed that it would .

Why the New York Attorney General is investigating on Bitfinex

iFinex, the company behind Bitfinex, always had problems storing their USD in Banks. In the past, it was Bank, but also Deltec Bank (located in the Bahamas), where it recently of USD stored. There’s also the company Crypto Capital Corp. (CCC), which is located in Panama, where Bitfinex sent over $1 Billion USD since 2014. Crypto Capital Corp. also used to work with bankrupt QuadrigaCX, the exchange which founder suddenly died under suspicious circumstances and left over $145 million unretrievable in cold storage.

The report by the NYAG states that Bitfinex never had a written contract or assurance with Crypto Capital Corp. Now the Panamanian company claims it cannot release the funds for Bitfinex account since the funds were According to the report by NYAG Bitfinex never informed its investors about that and instead tried to cover the gap of $850 Million with Tether reserves. Translated to our language that means, the same people that own Bitfinex and Tether gave themselves a credit over $850 million.

What could this all mean to the Crypto Market

In short: This could mean all or nothing. I recently asked the same to hear some opinions from the community. The opinions were pretty widespread. Some people think it could be actually good for Crypto if Tether would fail, some others think that it could mean a lot of trouble for it. I will explain three possible scenarios of how this could end for Crypto.

Scenario One: The Worst Case

I don’t want to spread Fear, Uncertainty and Doubt (FUD), I’m a Crypto believer myself. But If the money from Bitfinex is gone and CCC would never give it back to Bitfinex, they’re fucked basically. They would need to show that they’ve still enough money to not be insolvent. If they can’t, we have another Mt.Gox. Crypto loses.

Scenario Two: The Best Case

Of course, the money Bitfinex took from their Tether reserves is (in the best case) completely backed by USD. The way they did it and why they did it is suspicious and could indicate illegal activities. It won’t be the first faux pas like this a public company makes. The best case would be Bitfinex’ money gets released from Crypto Capital Corp. (CCC), they pay back the loan of $850 million to their own company Tether Corp., they get a small fine for not informing their investors and customers. Everyone is happy. Crypto wins.

Scenario Three: The most probable Case

The game continues. The Bitfinex lawyers try to prove that the loan from their own Tether wallet was completely legal. This court proceeding takes some years and the people actually forget about it. No one is mad anymore, but Tether won’t receive the reputation it got once. Stablecoins are still a thing, but the money is more diversified to Stablecoins like USD Coin (by Circle and Coinbase) or True USD (backed by a16z among many others). Crypto is fine with it.


Whether or not you believe Bitfinex version of the circumstances, you should not lose your believe in Crypto. All the problems Bitfinex had, were actually grown from their problems with storing their USD properly. They shoot themselves in the foot by creating Tether, because they didn’t have a bank to store the USD. Cryptocurrencies are not made to help banks and they all know it. Stablecoins are not always liked, they’re used by traders to manipulate the markets of course, but traders are also good for Crypto since they drive mainstream adoption and liquidity to it.

For further readings on the topic, I really recommend reading ’s on the Bitfinex problematic.

Disclaimer: All articles written by me are no financial advice. They reflect my personal opinion and does not affect my work on CoinBlick.

CoinBlick is an independent Crypto News App with the focus on providing the most important and readworthy crypto related articles of the day. now or .


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Faris Brni

Written by

Software Engineer, Crypto Friend and Creator of @CoinBlick. I like reading, writing, and spending time with my family.



AI-driven, personalised, and distraction-free Crypto News