When New York’s attorney general last week accused Bitfinex -- one of the world’s largest crytocurrency exchanges -- of hiding the loss of about $850 million in client and corporate cash, a crucial question was left unanswered: What happened to the money?
Bitfinex contends the funds haven’t gone missing at all. The exchange says the money was deposited with a Panamanian-company called Crypto Capital Corp. and then, through no fault of Bitfinex’s, seized by government authorities in the U.S., Poland and Portugal.
The wild story took another turn April 30 when federal prosecutors announced a grand jury had indicted Reginald Fowler, a 60-year-old Arizona businessman who once had a small stake in the NFL’s Minnesota Vikings. Fowler, along with an Israeli woman named Ravid Yosef, was accused of running an unlicensed money transmitting operation tied to virtual currency trading.
Fowler and a firm identified in the indictment, Global Trading Solutions LLC, have direct ties to Crypto Capital, according to people familiar with the matter. And the indictment notes that money in bank accounts opened by Fowler and Global Trading Solutions has been seized.
U.S. prosecutors, who want Fowler detained so that he doesn’t try to flee the country, said interviews conducted during their investigation have “corroborated in part” that companies affiliated with him may have failed to return $851 million to an unnamed client, according to a May 1 court filing.
Fowler’s attorney didn’t respond to a request for comment and Yosef couldn’t be reached for comment. Crypto Capital didn’t respond to an email seeking comment.
How Bitfinex and Crypto Capital got involved with each other is laid out in an April 26 lawsuit filed by New York Attorney General Letitia James. She alleged that because Bitfinex was unable to access about $850 million in client and corporate funds, it arranged for a loan from Tether Ltd., which is controlled by the same group of executives as Bitfinex. James didn’t bring a case against Crypto Capital.
‘Bad Faith’
Bitfinex, in an April 26 statement, said James’ suit was written in “bad faith and riddled with false assertions.” An email sent to the general counsel of Bitfinex and Tether wasn’t returned.
The attorney general’s case is notable because many traders consider Tether coins, which can be bought and sold on Bitfinex, to be critical to the broader cryptocurrency ecosystem. Tether is widely used to bet on price moves for other tokens and traders rely on it as a substitute for fiat currency, based on Tether Ltd.’s historical claims that each token is backed by $1 of assets. Though, Tether Ltd. said earlier this week that is no longer the case and that its reserves equal 74 percent of outstanding coins.