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Bitfinex Plans ‘Exchange Token’ To Recover $850 million Lost Funds

Bitcoin

Cryptocurrency exchange Bitfinex found itself in hot water with authorities in New York, after it was revealed the state’s Attorney General has filed legal action against the firm’s parent company over its management of Tether assets.

IFinex, Inc., the parent company of both Bitfinex and Tether, is alleged to have granted itself access to ring-fenced Tether capital in USD, in the order of $900 million, after losing $850 million of its own money in a deal gone wrong with a Panama-based bank.

Now, the Attorney General wants the company to put the money back, and according to reports, IFinex has a creative plan to do just that.

While there has yet to be any official confirmation, a significant investor in the Hong Kong-based exchange said the company was considering launching an exchange token, in order to raise the capital needed to close the gap.

Investor Dong Zhao, a well-known cryptocurrency billionaire, said the exchange was planning to launch a token which would offer equity in the parent company IFinex, in a bid to bolster capital.

Bitfinex has claimed that the funds in question were “seized” by a number of enforcement agencies, and that the exchange continues to work to recover the money it lost.

However, according to the action filed by the New York Attorney General, the company should not have dipped into the Tether funds, which investors were repeatedly assured are there to back the stablecoin 1 to the US dollar.

If the plan comes to pass, it will be the second time Bitfinex has used an exchange token to resolve funding problems.

Back in 2016, Bitfinex launched the BFX token in order to compensate customers who lost money during a high profile hack of the platform. Less than a year later, the company celebrated paying back all those who had lost money in the hack in full, before retiring the token.

While the difficulties with Tether have caused ripples in the crypto world this week, analysts are confident Bitfinex will be able to recoup the lost money as demanded by the New York lawsuit, either from source or through the issue of the exchange token.

With some $300 million in Tether already reportedly pledged to the as-yet-unconfirmed exchange token, it looks like the idea has already won the backing of some substantial regional investors.

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