Steptoe & Johnson, one of the most prominent law firms in the digital currency space, has been hired by Bitfinex to possibly bring legal action against a cryptocurrency blogger. According to Bitfinex, the blogger, who is known pseudonymously as Bitfinex’ed, has been making false claims that have damaged the exchange’s reputation and contributed to “market manipulation“.
Bitfinex said in a statement that the law firm has been hired to investigate and respond appropriately to claims made by Bitfinex’ed and others spreading similar theories. While no specific actions have been taken against the blogger as of yet, the same statement said that “possible litigation” was at hand.
At the time of writing, the Twitter user under the handle @Bitfinexed was seeking donations for legal expenses, and compared their situation to the “frivolous” lawsuit that Bitfinex filed (and subsequently withdrew) against Wells Fargo in April of this year. In an email to CoinDesk, Bitfinex’ed seemed to think that Bitfinex’s steps toward legal action are little more than a publicity stunt or a scare tactic, and that the exchange had “no intent on completing”.
I am officially seeking donations to defend myself against Bitfinex’s frivolous lawsuit, rather than showing their numbers they seek to silence me.
I appreciate all the support you all have given me.
— Bitfinex’ed? #DontGetTethered (@Bitfinexed) December 4, 2017
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Cause for Concern
Bitfinex has been the subject of recent attention lately, so much so that the New York Times posted a piece entitled “Warning Signs About Another Giant Bitcoin Exchange”. The piece explained that despite being the largest cryptocurrency exchange in the world, Bitfinex remains a largely opaque operation with a noticeable lack of names and faces.
The piece came in the wake of a hack on the exchange that led to the theft of $31 million in Tether dollars. What was even more strange, however, was the fact that Bitfinex CEO Jan Ludovicus van der Velde and Chief Strategy Officer Phil Potter hold similar roles at Tether, which is based in Hong Kong.
The tie between Tether and Bitfinex has led many, including Bitfinex’ed, to speculate that the two companies have been working together to fraudulently inflate the price of Bitcoin. Although each Tether dollar (USDT) is supposedly backed up by a single US dollar in ‘real life’, the theory goes that Tether has been printing more USDT than it has USD to back them up. The USDT are then used in Bitcoin margin trading, artificially pumping up the price of BTC.
Bitfinex’ed has also made allegations that Bitfinex has profited from wash trading. Wash trading is when an investor simultaneously buys and sells an asset to make it seem like the asset is more in demand than it is in reality – an illegal practice.
Bitfinex’ed has been perhaps the most prominent voice in the cryptosphere to spread these theories and allegations through Twitter, Medium, and YouTube, accompanied with the pithy hashtag “#DontGetTethered”.
Regardless of whether or not the claims made by Bitfinex’ed are true, Bitfinex needs to plan a course of action to build trust with its users as well as with the governments of the countries that it occupies. As the value of Bitcoin continues to skyrocket and crypto moves further into the mainstream world, shadowy operations of any kind simply won’t cut it anymore.