Justice Department Charges Payment Processor of Bitfinex

Two individuals have been charged with shadow banking services to crypto exchanges, Bitfinex among them

While the NY Attorney General actively is investigating the latest dealing between Bitfinex and Tether and a $900 million bailout loan which was backed by the reserves of the stable coin, the US Department of Justice has announced that it is charging two individuals associated with the crypto exchange’s payment processor.

The company called Global Trading Solutions LLC is affiliated with the controversial payment processor of Bitfinex and also claims on its website to be servicing Quadriga, Coinapult, CEX.IO, and EXMO. The firm called Crypto Capital is owned by similarly named Global Trade Solutions A.G. US authorities charge two individuals connected to the matter with providing shadow banking services to crypto exchanges.

Over the past several months, clients of Bitfinex have started experiencing withdrawal delays. More recently the NY Attorney General’s probe into the matter last week revealed that the payment processor of the company called Crypto Capital was claiming to not have access to $650 million worth of Bitfinex funds, allegedly held by three governmental authorities – two in Europe and one in the US.

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Tether provided a credit facility to Bitfinex to the tune of $900 million to accommodate the exchange’s liquidity needs. This matter has been central to an investigation started by the NY Attorney General last week and caused a slide in cryptocurrency prices.

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As shown in the screenshots above, Bitfinex has been using a company called Global Trading Solutions LLC to accept deposits from its clients. The accounts connected to the firm have been held at HSBC USA.

Department of Justice Charges

Two individuals named Reginald Fowler and Ravid Yousef have been the focus of the US Department of Justice charges announced late last night. They have allegedly conspired to mislead financial institutions, (namely HSBC USA) that they are funneling money for real estate transactions, when in fact they used the funds to provide payment services for crypto exchanges.

Aside from Bitfinex, the duo allegedly provided services to other cryptocurrency trading venues. The individuals used accounts in their own names as well as corporate accounts held by Global Trading Solutions LLC.

The allegations against the pair are very serious and each is facing up to 30 years in jail on multiple counts. Misleading financial institutions in the way Fowler and Yousef did is also likely to attract serious scrutiny of part of US authorities especially given the high profile of the investigation.

The transactions took place between February and October 2018. A timeline which fits in with the alleged disappearance of a significant amount of money from Bitfinex.

Fowler, who got indicted and is under custody is also associated with a bid for the Minnesota Vikings in 2005. He became a limited partner in the group and admitted to having defaulted in October 2014 after a U.S. Bank obtained a judgment against him.

The charges asserted that his companies had over $6 million of unpaid debts to the bank and at least $53 million to other banks. Fowler was also a major investor in the Alliance of American Football where he pulled his financing a league after the season’s start. The move eventually led to the collapse of the initiative.

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