A Non-Exhaustive List of Bitfinex and Tether’s Misdeeds and Red Flags

This is a living document that I intend to continue to update as I continue to research Bitfinex and Tether. I hope it will serve as a useful reference material for anyone who needs to try to keep in mind their many inappropriate behaviors. If you find any I missed, feel free to leave a comment. Update: since this is a living document I wanted to provide you an archive link of the original so you can see any changes that are made. You can find that here. If you believe I made a mistake then feel free to leave a comment. It is not an introduction or summary. For that you can look here:

There were unbacked Tethers.

Update 6/21/21: Tether advertised no-KYC swaps between Bitcoin and Tether.

Bitfinex was founded by an active participant in and defender of ponzi schemes, who after losing much of his bitcoins in a ponzi scheme, tried to start his own high yield lending program. When people were hesitant to hand their funds over to such a passionate ponzi participant he quickly moved on and founded Bitfinex.

Bitfinex was started by using stolen code written by a teenager, the code had known exploits. (Archive

Tether was founded by Brock Pierce. Brock Pierce once left the United States with indicted child sexual predator Marc Collins-Rector to go to Spain (archive) where the two lived together. They were both arrested and significant amounts of child pornography were found in the house. (Archive) Brock was released without being charged.

Tether’s first Chief Compliance Officer was Matthew Tremblay. If you can confirm he is a real person, please let me know. I cannot track him down. Reverse image search on his picture returns nothing, he is no longer mentioned on Tether’s website, and I cannot find his LinkedIn, Twitter, Instagram, blog, conference speeches, articles, or any other of the modern online detritus our lives generate.

Update 6/24/21: I have now seen at least one social media account for Matthew Tremblay and he does appear to have a corporeal form. It is still unclear what he did before Tether and what he does now.

Update 6/22/21: Craig Sellars one of the co-founders of Tether does say he worked with Tremblay during his time at Tether.

http://web.archive.org/web/20210622181938/https://twitter.com/OmniCraig/status/1407402461942489094

The Chief Financial Officer of both Bitfinex and Tether sold pirated software (archive) and had to pay Microsoft for it.

The General Counsel of both Bitfinex and Tether was the Director of Compliance for Excapsa. (Archive) Excapsa was the parent company of Ultimate Bet, and during his tenure there Ultimate Bet had a god mode that allowed some players to see other players cards. (Archive)  Stu was the Director of Compliance for a non compliant poker site.

Bitfinex had to pay a settlement to the CFTC for offering illegal off-exchange transactions. (Archive) (My copy)

https://tether.to/wp-content/uploads/2016/06/TetherWhitePaper.pdf (Archive) (My copy)

Tether originally promised to always be backed 1:1 by cash. They are now 3% backed by cash.

Tether commingled client and corporate funds. Bitfinex commingled client and corporate funds. Bitfinex and Tether commingled their commingled funds together. Bitfinex and Tether gave over $1 billion in these funds to alleged money launders without signing a contract or agreement of any kind. (Archive) (My copy)

The payment processor who Bitfinex and Tether had given funds to is implicated in embezzlement, bank fraud, wire fraud, counterfeiting, and money laundering for the Colombian Cartels (allegedly through Bitfinex).

Update 6/22/21: Separately, other money launderers for the cartels were using casinos and tethers to launder their funds, along with trying to use Tethers to bribe federal agents. (Archive) (My copy)

Tether has lied every single day for the last several years on their transparency page about the number of quarantined Tethers. Either they have some secret motivation for this or a $65 billion dollar fund fail to add correctly every single day when they update it.

Bitfinex and Tether have used bots and sockpuppets to manipulate social media sentiment about their companies.

There are extraordinarily suspicious features surrounding the Tether hack, no formal explanation has ever been given.

After this hack Tether used their dominant economic position on the Omni layer to force a hard-fork. (Archive) After this a feature was added so that Tether would always be able to freeze any tether in circulation.

No post-mortem or security audit was provided after either Bitfinex hack.

Tether promised to be regularly audited, they have never been audited.

Tether at one point had hired Friedman LLP to complete an audit, but the relationship ended due to the “excruciatingly detailed procedures” that Friedman was following. (Archive)

Bitfinex promised an audit after their 2016 hack, they have never been audited.

After the 2016 hack Bitfinex claimed to socialize the hack across ALL accounts. (Archive) According to reporting by Nathaniel Popper this was a lie, Coinbase did not receive the haircut.

http://web.archive.org/web/20210622002534/https://twitter.com/nathanielpopper/status/933130228175552513

Bitfinex promised they would provide an accounting of their methodology to calculate the haircut amount. (Archive) No such accounting was provided.

Tether executives received aperiodic large payments from the Tether reserves.

When Bitfinex lost banking with Wells Fargo they sued, in what Phil Potter later described as solely an attempt to ‘buy time’

From March 2017 through the middle of September 2017 Tether did not have a bank. The only cash holdings they had were held in trust in the account of Stuart Hoegner, their general counsel. This account had $61.5 million dollars in it. (Archive) (My copy)

During this period, the remainder of Tether backing was allegedly a receivable from Bitfinex. Bitfinex’s bank account during this period received deposits from only two clients. Neither purchased Tethers. (Archive) (My copy) Nonetheless, the number of Tethers grew from approximately $35 million to $443 million. It was impossible to redeem tethers with Tether during this period.

Tether has provided no explanation for how the above combination of events is possible, I tried to provide the version that gives them the maximum benefit of the doubt here (note I still consider this version of events unacceptable):

The bank Bitfinex and Tether was using after this point was Noble Bank. This bank was founded by Brock Pierce, the co-founder of Tether, and Eugene Sullivan (who would later write a ‘not-attestation’ for Tether) was on the board. Freeh who also was part of this ‘not-attestation’ had previously worked with Brock at Sunlot as part of his attempt to purchase Mt. Gox.

For their attestation on September 15th 2017 from Friedman Tether transferred hundreds of millions of dollars from Bitfinex’s account mere hours before the attestation occurred. (Archive) (My copy)

Bitfinex claimed in public that withdrawals were working fine while simultaneously begging Oz of Crypto Capital Corp to allow them to withdraw. (Archive) (My copy)

The day after releasing a letter from Deltec bank purporting to show that Tether was fully backed Bitfinex took hundreds of millions from the account.

Tether is one of the largest players in the commercial paper market, yet no one seems to have heard of them.

Update 7/21/21: Today on CNBC Stuart Hoegner claimed the NYAG had found issues with their disclosures but they had updated it within three months. This was untrue. As early as March of 2017 Tether was partially backed by receivables. The disclosure was not updated until February of 2019, almost two years later. Even giving Stu the most generous possible interpretation of his words, where he was just discussing the transactions in 2018 it is still longer than three months. They started in the summer of 2018 and again weren’t disclosed until the end of February 2019. Stuart Hoegner was lying.

http://web.archive.org/web/20211020144655/https://tether.to/legal/
https://archive.md/t9NPY

Update 10/20/21: Recent information about the nature of the secured lending agreement between Celsius and Tether reveals that Tether ignored it’s own terms of service and would issue Tethers in exchange for these crypto secured loans instead of money.

Update 10/20/21: A recent CFTC settlement has revealed additional information about red flags and misdeeds of Bitfinex and Tether. They were:

  • Bitfinex was violating their previous settlement with the CFTC and still offering illegal options to US persons.
  • Bitfinex was encouraging their staff to make sure not to document US persons they encountered.
  • Bitfinex customer service was encouraging customers to use VPNs and telling them they could likely avoid KYC procedures.
  • Tether was only backed for about 1 day in 4 for the 26 month period that the CFTC took a look at.
  • Tether had dozens of financial agreements without signed contracts.
  • Tether was using Crypto Capital Corp to hold their reserves (a claim I had already made).
  • Tether did not have accurate records (a claim I had already made).
  • Tether was giving out Tethers before they would receive funds.

Update 10/20/21: There are several conflicts of interest for various executives of Bitfinex and Tether that it is important to be aware of. They are:

  • Giancarlo Devasini is also a partner in BlueBit Capital, a cryptocurrency hedge fund.
  • Silvano di Stefano, the Chief Investment Officer of Tether, is also a partner in BlueBit capital.
  • Paolo Ardoino was a director in Delchain, the cryptocurrency focused offshoot of their bank, Deltec Bank and Trust.
  • JL Van der Velde is an executive director in a VC fund.

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