Why is Bitcoin down? All you need to know about the Bitfinex 'fraud' news

26 Apr, 2019 | Updated: 26 Apr, 2019
by Jelmer van der Dussen
Bitcoin
Why is Bitcoin down? All you need to know about the Bitfinex 'fraud' news

Bitcoin and pretty much all the altcoins have seen a drop today following the news that an investigation against Bitfinex and Tether has being launched. Why exactly is Bitcoin down, and what is the Bitfinex news all about? This is everything you need to know about the latest drop in the Bitcoin and cryptocurrency market.

The investigation
Late Thursday, New York State Attorney General Letitia James released a court order against iFinex, the company behind cryptocurrency exchange Bitfinex and stablecoin Tether. It turned out Bitfinex is being investigated over an alleged cover up of $850 million by printing Tether funds.

According to the court order, Bitfinex sent $850 million of customer and corporate funds to Crypto Capital, a Panama-based payment processor holding funds from different exchanges, didn't get the funds back, and accessed $900 million Tether cash reserves to cover up the loss.

Bitfinex allegedly never revealed the loss to investors. The New York Attorney General states that iFinex, the company behind Bitfinex and Tether, may have violated New York Law and defrauded New York investors.

How bad is it?
Looking beyond the scary headlines, the full statement of the Attorney General reveals some clarifying details that takes away most of the panic in the market - for now. So far there has been no criminal charges levied, no cease and desist ordered and the NYAG even 'encourages Bitfinex/Tether to stay up and running'. 

How did Bitfinex respond?
Bitfinex and Tether both came out with a statement hours after the news broke. 'The New York Attorney General’s court filings were written in bad faith and are riddled with false assertions, including as to a purported $850 million “loss” at Crypto Capital', Bitfinex stated.

'We have been informed that these Crypto Capital amounts are not lost but have been, in fact, seized and safeguarded. We are and have been actively working to exercise our rights and remedies and get those funds released.' It seems therefore the 'loss' of funds is not a Bitfinex situation, but a Crypto Capital situation.

Both Bitfinex and Tether state that they 'are financially strong - fullstop'. 'Moving forward, both allied companies commit to fight the NY Attorney General’s 'gross overreach' against companies that are 'good corporate citizens and strong supporters of law enforcement'. 'Bitfinex and Tether will vigorously challenge this, and any and all other actions, by the New York Attorney General’s office.'

How did the market react?
The cryptocurrency space has seen worse drops when panic entered the market. Bitcoin only dropped around 7%, before moving back up again, still trading way above $5000. In these situations it's important to zoom out and look at the bigger picture. In the last 30 days, Bitcoin is still up 30%.



Chart provided by Tradingview

Altcoins took a bigger hit, with top 25 coins Basic Attention Token and Maker amongst the worst performers, both down 12%.

Projects such as Enjin Coin, Omise Go, WaltonChain, Nano, Golem and ARK are down around 10%. In the top 20 Tezos has been hit the hardest, losing 9% of its value. Ethereum dropped almost 5%. Interesting is the performance of both Litecoin and Binance Coin: both projects didn't seem to be affected by the drop and are even in green (0,31% and 1,77%).

What did the community say?
The community first reacted with panic, but soon voices came out to put the news into perspective.

Others criticized Tether or warned for the stablecoin.

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