
Bitfinex Interim Update - Heliosmaster
http://blog.bitfinex.com/uncategorized/bitfinex-interim-update/
======
Animats
The founder of BitFinex, Raphael Nicolle, seems to have disappeared.[1] It
also turns out that he previously tried to start a Ponzi scheme. His previous
job was working the help desk at Gutenberg Networks, according to LinkedIn.

BitFinex has been in previous trouble with the CFTC over customer account
custody issues.[2] Having multi-sig keys doesn't help if the exchange has the
keys.

Inside job?

[1] [https://www.cryptocoinsnews.com/bitfinexs-ceo-seemingly-
trie...](https://www.cryptocoinsnews.com/bitfinexs-ceo-seemingly-tried-start-
ponzi-scheme/) [2]
[http://www.cftc.gov/idc/groups/public/@lrenforcementactions/...](http://www.cftc.gov/idc/groups/public/@lrenforcementactions/documents/legalpleading/enfbfxnaorder060216.pdf)

~~~
dhfromkorea
I am not familiar with the early days of BitFinex, and I hope the conclusion
the two articles point to may not be true.

How come so many people managed to trust BitFinex that appears to have such
opaque management?

If it's an insider job by the founder, why did (s)he not withdraw 100% of the
assets in the exchange? Probably to make it look more likely to be done by an
outsider(s)?

~~~
tinco
If I recall correctly 100% of the assets that were withdrawable were actually
withdrawed.

edit: Well regardless of that being the case, why would an attacker not
withdraw all the funds they can lay their hands on?

Many people seem to believe the bitcoin-exchange-as-a-scam thing is worthwile,
but I don't think it really is. Karpeles is in jail, and will be for a very
long time, and I've heard he doesn't enjoy his jail time much.

The identities of these people are known, their spending can be tracked. I
can't see how the life of a exchange scammer is in anyway more attractive than
that of a straightforward exchange runner. What are they going to do, cash out
a couple of million somewhere and emigrate to South America? They could do the
same simply by selling their exchange. Besides, Dread Pirate Roberts showed
that emigrating is not really attractive to many people, even when not doing
so is a terrible idea.

~~~
httpagent
Mark Karpeles is not currently incarcerated and is busying himself by taunting
the twitterverse.

[https://news.bitcoin.com/inside-scoop-mark-karpeles-
release/](https://news.bitcoin.com/inside-scoop-mark-karpeles-release/)

[https://twitter.com/magicaltux?lang=en](https://twitter.com/magicaltux?lang=en)

~~~
tinco
Oh wow, that news totally passed me by. The knowledge that he was in jail had
a definite positive impact on my quality of life.

------
f055
It seems like a pattern with Bitcoin platforms: 1\. Start an exchange 2\. Get
millions in assets 3\. Claim a hack 4\. Profit

I'm surprised the Nigerian prince didn't jump on this one.

~~~
frevd
I wonder if this was actually a sophisticated trade to profit from shaking up
the market - claiming a substantial hack to make the market panic, then buy
back the "lost" coins for way lower prices. If you control this kind of assets
you can easily corner the market and participate from the emotional reactions.
The lost coins can either not be lost at all or sold off way before that in
small chunks, netting a profit after all is over.

------
TekMol
Still no word on what happened.

How did the heist happen? Why did BitGo sign the transactions?

My expectation: It will throw a very bad light on BitFinex and BitGo when the
nature of the breach is revealed.

~~~
Animats
BitGo announced two days ago that their insurance policy was discontinued in
January 2016. They claim their customers were informed of this.[1] Customers
are claiming they were not.

[1] [https://blog.bitgo.com/bitgo-secures-first-ever-
comprehensiv...](https://blog.bitgo.com/bitgo-secures-first-ever-
comprehensive-bitcoin-theft-insurance-xl-group-insurance-companies/)

------
awt
That Bitfinex was not legit was predicted:
[http://btcbase.org/log/2013-05-16#34498](http://btcbase.org/log/2013-05-16#34498)

------
rbobby
So... just pretending not to be insolvent and hope nobody goes to court to
force them into insolvency?

~~~
eximius
Their argument is that this haircut is pretty much what would happen if they
went into insolvency voluntarily. But now they are opening an avenue to redeem
themselves and stay operating.

It makes some sense. I don't know whether I think it is a good idea, but it
isn't without sense.

~~~
rbobby
Except of course with insolvency an independent 3rd party is put in charge and
the board power's removed and a court overseas any liquidation of assets and
repayment of creditors.

Here on the other hand... the existing players all remain in place and whether
or not there's any liquidation occurring is unknown. If auctioned I wonder
what bitfinex as an entity would be worth? Or even just it's assets (like a
functioning, somewhat, crypto-currency exchange application)?

Frankly I'm a bit surprised. There can be significant legal risks involved in
operating a business that you know is insolvent.

------
jboggan
So everyone loses 36% of their account value?

~~~
467568985476
Seems like it... this can't possibly be legal, right? Surely the company
should be forced to liquidate to make customers whole again, or issue
debt/equity to get the money. I'd love to read a take on this from someone
with a better understanding of the regulatory environment Bitfinex is subject
to.

~~~
Animats
From a CFTC action: "BFXNA Inc. d/b/a Bitfinex is a corporation formed and
existing under the laws of the British Virgin Islands, and has its principal
place of business at suite 13/F, 1308 Bank of America Tower, 12 Harcourt Road,
Central, Hong Kong, China."

