Bennett's Articles

Tether and Bitfinex Introduction

Tether and Bitfinex are two of the most important companies in the cryptocurrency ecosystem. Tether is the largest stablecoin, and the primary driver of volume and liquidity. Bitfinex used to be the largest cryptocurrency exchange, and still is a frequently used exchange. Tether and Bitfinex have an incredibly problematic past and are quite possibly the largest corporate fraud in history. Read more: https://bennettftomlin.com/2021/08/08/tether-and-bitfinex-introduction/ [https://bennettftomlin.com/2021/08/08/tether-and-bitfinex-introduction/]

An Introduction to the Tether and Bitfinex Controversy

https://bennettftomlin.com/2020/12/08/an-introduction-to-the-tether-bitfinex-controversy/ [https://bennettftomlin.com/2020/12/08/an-introduction-to-the-tether-bitfinex-controversy/]

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

https://bennettftomlin.com/2021/06/21/a-non-exhaustive-list-of-bitfinex-and-tethers-misdeeds-and-red-flags/ [https://bennettftomlin.com/2021/06/21/a-non-exhaustive-list-of-bitfinex-and-tethers-misdeeds-and-red-flags/]

A History of Tether and Bitfinex’s Audits, Attestations, Memos, and Letters: Both Promised and Actual

https://bennettftomlin.com/2021/07/17/a-history-of-tether-and-bitfinexs-audits-attestations-memos-and-letters-both-promised-and-actual/ [https://bennettftomlin.com/2021/07/17/a-history-of-tether-and-bitfinexs-audits-attestations-memos-and-letters-both-promised-and-actual/] Amidst all the confusion surrounding Tether and Bitfinex it can be difficult to keep track of what they have actually provided in terms of audits, attestations, and other documents to support their contentions. Here I will summarize, but the important note that needs to be included at the top is that both Bitfinex and Tether once hired an auditor, but neither ever completed the audit. Ever since Tether was founded they have promised to provide a full financial audit. It feature prominently in their whitepaper and on their website for years. They have never provided this audit, but have provided a variety of other documents meant to convince the public that they had sufficient backing for the tethers in circulation. In March of 2015 Tether and Factom announced [http://web.archive.org/web/20150312095046/http://blog.factom.org/post/113164492609/announcing-tether-factom-collaboration] (archive [http://web.archive.org/web/20150312095046/http://blog.factom.org/post/113164492609/announcing-tether-factom-collaboration]) they had formed a partnership to provide greater transparency into Tether’s holdings. The partnership never provided any additional transparency into Tether or its operations. In August of 2016 Bitfinex promised [https://blog.bitfinex.com/announcements/interim-update/] (archive [http://web.archive.org/web/20210717153440/https://blog.bitfinex.com/announcements/interim-update/]) to provide a full financial and security audit after they were hacked. They initially announced that Ledger Labs was hired to perform both. No audit from Ledger Labs was ever released. This was likely in part due to the fact that Ledger Labs was not able to provide financial audits. In May of 2017 Bitfinex announced [https://www.bitfinex.com/posts/202] (archive [http://web.archive.org/web/20210717154137/https://www.bitfinex.com/posts/202]) they had engaged Friedman LLP out of New York to audit them. As of today in 2021 we have yet to get an update from Bitfinex on the status of this audit. In September of 2017 Tether announced [https://tether.to/tether-update/] (archive) that they had engaged Friedman LLP out of New York to audit them. This audit would never occur, we would eventually get an update from a Tether spokesperson saying the relationship dissolved, citing the “excruciatingly detailed procedures” [https://www.coindesk.com/tether-confirms-relationship-auditor-dissolved](archive [http://web.archive.org/web/20210717155131if_/https://www.coindesk.com/tether-confirms-relationship-auditor-dissolved]) that the auditor wanted to undertake. Also in September of 2017 Tether released from previous attestations from a small accounting firm in Taiwan called TOPSUN. These were monthly attestations attesting to Tether having sufficient backing for the end of the month from December 2016 through March 2017. Strangely these were not completed at the end of the respective months but were all completed on May 23rd 2017. (Strangely approximately two weeks after they announced that Friedman had been brought on to audit Bitfinex) Read more... https://bennettftomlin.com/2021/07/17/a-history-of-tether-and-bitfinexs-audits-attestations-memos-and-letters-both-promised-and-actual/ [https://bennettftomlin.com/2021/07/17/a-history-of-tether-and-bitfinexs-audits-attestations-memos-and-letters-both-promised-and-actual/]

The Available Evidence that Tether and Bitfinex Committed Bank Fraud

https://bennettftomlin.com/2021/07/26/the-available-evidence-that-tether-and-bitfinex-committed-bank-fraud/ [https://bennettftomlin.com/2021/07/26/the-available-evidence-that-tether-and-bitfinex-committed-bank-fraud/] Recently Bloomberg reported that several Tether executives [https://www.bloomberg.com/news/articles/2021-07-26/tether-executives-said-to-face-criminal-probe-into-bank-fraud?srnd=premium&sref=vuYGislZ] (archive [https://archive.is/CMqsv]) have gotten ‘target letters’ for bank fraud from the Department of Justice. There is evidence that Tether and Bitfinex may have participated in bank fraud. We have several reasons to believe that Tether may have committed bank fraud starting by this video that was saved by Bitfinex’ed [https://twitter.com/Bitfinexed]. > We’ve had banking hiccups in the past, we’ve just always been able to route around it or deal with it, open up new accounts, or what have you… shift to a new corporate entity, lots of cat and mouse tricks. > Sometimes those accounts get shut down because the correspondent banks realize this is Bitcoin related. The specific claim that Bloomberg is claiming is under investigation is that Tether may have misrepresented to banks their line of business and tried to hide that it was cryptocurrency related. I think the above quotes make it extraordinarily likely that Tether was doing exactly what they are accused of. Update: I forgot to mention the below story that the NYAG revealed. [https://bennettftomlin.files.wordpress.com/2021/07/screen-shot-2021-07-26-at-6.54.10-pm.png?w=1024]https://iapps.courts.state.ny.us/fbem/DocumentDisplayServlet?documentId=vIexA1b0spKOnK_PLUS_ZUGTJ3A==&system=prod [https://iapps.courts.state.ny.us/fbem/DocumentDisplayServlet?documentId=vIexA1b0spKOnK_PLUS_ZUGTJ3A==&system=prod] (Archive [http://web.archive.org/web/20210501223914/https://iapps.courts.state.ny.us/fbem/DocumentDisplayServlet?documentId=vIexA1b0spKOnK_PLUS_ZUGTJ3A==&system=prod]) (My copy [https://bennettftomlin.files.wordpress.com/2021/01/450545_2019_in_the_matter_of_the_i_v_in_the_matter_of_the_i_petition_1.pdf])When the New York Attorney General filed their request for an ex parte order they revealed that for a period that Bitfinex depended on ‘friends of Bitfinex’ who would use their accounts to service withdrawals. It is very likely in my opinion that this was not fully disclosed to their banks. It is also important to remember that Bitfinex and Tether relied on Crypto Capital Corp [https://bennettftomlin.com/2021/02/20/what-is-crypto-capital-corp/] to provide ‘Bank Fraud as a Service’. Crypto Capital Corp would misrepresent to banks that they were in real estate, while actually providing shadow banking services to Bitfinex, Tether, Kraken, Quadriga, Bitmex and others. They would also use fake bond certificates to claim to have more funds than they actually did, and the principal was arrested with counterfeited bills and the ability to issue more. It is thanks to this fraudulent behavior that Crypto Capital Corp was able to maintain banking relationships for the periods where they could. When Tether lost banking in 2017 [https://bennettftomlin.com/2021/02/28/the-best-case-scenario-for-tethers-activities-in-2017/], they likely depended on Crypto Capital Corp. It would be Crypto Capital Corp eventually having their bank accounts seized that would lead to Bitfinex robbing hundreds of millions [https://bennettftomlin.com/2021/02/23/analysis-of-the-tether-bitfinex-nyag-settlement/] of dollars from Tethers account. Moral of the story, don’t lie to your bank.