TheMerkle_Bitfinex Pocketing User Funds

It has been one of the dominating revelations in recent times for the crypto industry. The $850 million Bitfinex-Tether scandal has grabbed all the headlines in the past month. Since the New York Attorney General announced an investigation into the two firms, the industry has waited with bated breath to see where this latest scandal leaves us.

Well, the scandal could be much bigger than we previously thought. According to one cryptocurrency YouTube star, the number of people in this intricate web of deception is quite high. And it includes some of your favorite crypto personalities.

In his latest video, Tyler Swope dug into the Bitfinex mess. Swope, who runs the popular Chico Crypto channel highlighted the web that began with the arrest of Reginald Fowler. The prosecutors charged Fowler, a former part-owner of NFL team Minnesota Vikings, with operating a shadow banking chain for crypto exchanges. Upon further investigations, The Block discovered that Fowler’s companies were key partners with Crytpo Capital, the Panamanian company that prosecutors allege either stole or lost $850 million belonging to Bitfinex.

However, that’s not all. What some may not be aware of is that Crypto Capital was in the heart of the QuadrigaCX scandal. This was yet another mega-scandal that raised a lot of questions on how exchanges handle our tokens.

It goes deeper. Crypto Capital is purportedly extensively linked with Coinapult, a crypt wallet services provider. Erik Voorhes, the CEO of ShapeShift was one of the founders of Coinapult with Bitcoin.com’s Roger Ver also being involved with the Panamanian company.

In Comes Binance

Away from the back room gimmicks that could cost the crypto industry $850 million, another angle is shaping up. This angle puts the largest cryptocurrency exchange globally at the center of it all.

Binance has been the largest holder of Tether tokens for over a year now, rightly so given its high daily trading volume. In an interview recently, the iconic CZ pronounced that he had met with Bitfinex executives and that he was certain the accusations against them – of having lost the money – was just FUD. As we now know, it wasn’t FUD. Bifinex did indeed lose money to Crypto Capital.

It goes on. Towards the end of April, CZ announced on Twitter that Binance was moving funds as a standard operating procedure.

One large transaction he said, but he lied. According to information available on the blockchain, Binance moved the USDT tokens to thousands of different addresses. The transactions are in small amounts, all sent to different addresses.

Significantly, after the transactions, the amount of Tether that the exchange held in its cold wallets was $100 million less. For one, it’s possible that there were withdrawals by clients, forcing the exchange to turn to its cold storage. What’s more likely, however, is that the exchange cashed out the tokens. And this was just days ago, so there’s no reason to think it won’t do the same again soon.


The Golden Opportunity

If Binance is cashing USDT tokens, it could mean that it sees a bleak future in the stablecoin. Should it cash out all the tokens, there’s no telling how the market will react, especially given the recent questions on whether USDT tokens are fully backed.

And therein lies the golden opportunity for Binance; the creation of its own stablecoin. In recent times, a number of stablecoins have emerged aiming to take over from Tether. While some like USDC have had the backing of exchanges such as Coinbase, a stablecoin backed by Binance would be lightyears ahead.

And CZ has given us hints in the past, stopping short of blatantly declaring this to be the ultimate goals for Binance.

 

Image(s): Shutterstock.com


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