Less than 24 hours ago, Bitfinex announced on their official channels that a $100 million USD payment was made to Tether. Earlier this year, the cryptocurrency exchange had claimed that the company’s funds had been seized from the hands of Panama based crypto payments enabler Crypto Capital.

The official statement from Tether stated –

“Bitfinex is pleased to announce that on July 1, 2019, it repaid $100,000,000 of the outstanding loan facility to Tether. Bitfinex made this payment in fiat wired to Tether’s bank account. This amount was not yet due to be paid to Tether under the facility, but Bitfinex has made the prepayment based upon its financial position at the end of the second quarter of 2019.”

Tether later confirmed from an official statement of their own.

Some history

New York’s Attorney General, Letitia James had launched an independent probe against the cryptocurrency exchange in April 2019, alleging that the exchange had “engaged in a cover-up to hide the apparent loss of $850 million of co-mingled client and corporate funds,”.

To this, Bitfinex strongly retorted, saying that this was a vast overreach from the AG’s office, and that both Tether and Bitfinex would “fight this vigorously”. The retort for this from the AG’s office was that they had reason to believe that Bitfinex still served US investors.

This legal battle continued in a New York court, wherein the lawyers representing Bitfinex requested motion to dismiss, citing lack of proof and jurisdiction. The matter hasn’t reached a conclusion yet, but Bitfinex has taken a step to expedite this issue by publicly announcing the repayment of the loan, with interest, in fiat.

Where could the money have come from?

To be fair, Bitfinex has always maintained that they have been financially strong, but some withdrawal issues, as well as Tether recently claiming that they weren’t fully backed by USD reserves, does lead one to speculate that there could have been a financial crunch that Bitfinex had to get out of.

Assuming this, here are 3 possible ways in which Bitfinex could have raised this money, with interest –

  1. Bitcoin’s recent rally – With Bitcoin breaching the 200 billion market cap, company liquidity could have almost tripled in less than a month. This possibly could have left the exchange with surplus cash, part of which could have been invested into the recently announced loan repayment.
  2. LEO’s 1 billion USD raise – Clocking in one of the world’s biggest token raises, Bitfinex’s LEO token could have added to the company’s liquidity reserves. The token currently has a market cap of over 1.7 billion, which has happened in a little over a month. Through team and company reserves, Bitfinex could have found the extra liquidity needed.
  3. Resolution on seized funds – Bitfinex claimed that close to a billion dollars were seized from their company operations due to their association with Crypto Capital. There has been no further announcements from either party on the seized funds, but there could have been a behind the curtains settlement, that could have contributed to this recent repayment.

Given that they’re a private company, Bitfinex doesn’t need to disclose any of these internal financial details. They have used this very reason to obtain a stay order from disclosing key documentation with the OAG.

It almost seems like this display of loan repayment is almost a signalling method. Truth be told, announcements from both companies doesn’t really prove anything, as they’re owned by the same entity. There are some murky details hidden in the history of Bitfinex, as explained by Tyler from Chico Crypto –

Why they would resort to this tactic remains to be seen. We’ll keep you posted.

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