Multiple US-based investors have purchased Bitfinex’s LEO tokens using loopholes as the company was not selling directly to them, Coindesk revealed on Thursday.
Though Bitfinex specifically excluded US-based investors from selling LEO, Seattle-based Arrington XRP Capital and Los Angeles-based Arca confirmed that they bought the exchange-specific tokens from third parties.
Arrington XRP Capital is registered in the Cayman Islands. However, its partner Michael Arrington is a US citizen, which makes the firm ineligible to purchase LEO.
“[Bitfinex was] strict in not selling to Americans, and even though we aren’t a U.S. fund I don’t think we would have been approved because I’m American,” Arrington told Coindesk. “We hit a brick wall trying to do it directly.”
And as I said, this is the kind of person you are aligned with. I think we were pretty public with our purchase of LEO at the initial offering.
— Michael Arrington (@arrington) July 20, 2019
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The case is similar for Arca. Though the company is registered in the British Virgin Islands, its partners are US citizens.
“Arca legally obtained LEO tokens through a third party,” a spokesperson of the company told the publication.
An urgent fundraising
iFinex, the parent of Bitfinex and Tether, launched LEO after the New York Attorney General’s office accused the exchange of taking a loan from Tether to cover up its $850 million in losses incurred from its payment processor Crypto Capital.
The company later revealed that it raised $1 billion by selling its platform-specific LEO tokens to accredited investors behind closed doors.
Bitfinex also initiated repaying Tether for the loan and already transferred $100 million to the stablecoin operator’s accounts.
Meanwhile, the prosecutor recently accused the crypto exchange of offering services to New York-based investors. However, the exchange denied all claims and stated that it only served to entities in the US that were eligible to trade on the platform.
“LEO tokens were not available to the general public and were not offered to any United States customers or to foreign [eligible contract participants] with shareholders that reside in the United States,” the general counsel of the exchange noted on the court filings.