BitFinex denies insolvency, plays hide-and-seek to bank with HSBC ?

Amid rumours surrounding the financial stability of it and Tether (USDT), the exchange moves to quash rumours of financial woes. 

Chatter among the cryptocurrency community last week once again turned to BitFinex, its relationship with the so-called stablecoin Tether (USDT), and the financial status of the two. The news that Puerto Rico’s Noble Bank – the bank most recently associated with the pair, and the latest stop in the linked concerns’ infamously itinerant history – was up for sale seemed to ignite rumours that the exchange suffering financial problems.

Fuel was added to that spark by some of the many, already vociferous, critics of the duo. They believe the two work in tandem to manipulate the cryptocurrencies markets to their own ends, and are complicit in a irreconcilable conflict of interest through the simple fact that one of the world’s major exchanges and the world’s second most traded crypto, by volume, share senior management.

On Saturday, however, all of the various issues, ongoing problems – and the alleged censoring of complaints by BitFinex – were laid out in a Medium blog titled Warning: Bitfinex is No Longer Solvent — Remove Your Money Now by a crypto-commentator (or commentators) working under the name ‘ProofOfResearch’. It traced a potted history of the issues surrounding BitFinex and the ongoing rumours of problems removing fiat funds from the exchange – backed up by a slew of deleted complaint posts from the BitFinex subreddit, and the seemingly disingenuous replies from support staff attempting to explain why there were issues with the service’s banking.

The problem, the blog asserts, adds up to over $1m-worth of assets currently in limbo, from Reddit users alone. Also, in its attempt to build a case that BitFinex, the articles insinuates that a couple of other potentially worrying technical problems are directly connected to the matter. The upshot being that the exchange simply cannot meet obligations to its customers when they wish to cash out.

It’s a pretty damning, though subjective and circumstantially evidenced, missive. However, it ‘proves’ little, other than the fact a certain sub-section of the BitFinex user base is having extremely concerning problems with the site and very little help from its customer service. Whether you see it as indicative of a larger issue or not, it does not reflect well – especially in the light of past history, and apparent current banking problems.

It was enough to illicit a response from the exchange itself, which blogged on Sunday.

Its pejoratively titled reply, A Response To Online Rumours (online articles are still written by diligent, intelligent humans – sometimes), Bitfinex makes a three-pronged rebuttal to the ‘Medium articles’ (none of which are directly linked for reference). The first is to point out its small team, and contrastingly large crypto wallets, as a denial of it being insolvent; the second is to deny any problems with fiat withdrawals from the site – while acknowledging that it is doing its “utmost to minimise any waiting times”; and finally denying that Noble Bank’s current problems have any influence on its situation (that last one is apparently true, at least according to research by BitMex).

As is perhaps to be expected from a strident critic of the exchange, BitFinex’s response was not enough for ‘ProofOfResearch’, which dived into another analysis yesterday. Its general gist was that: a) the crypto BitFinex holds in its wallets is its customer’s, and appears to have been significantly depleted in the last month; b) it could be about to suffer a ‘run’ on those wallets; c) BitFinex is certainly tied to Noble Bank; d) the post doesn’t address the meat of its original article – the censoring of alleged problems on the exchange on Reddit.

In the midst of all of this, crypto-analyst Larry Cermak posted to Twitter that he believes BitFinex is currently using the services of HSBC for its banking, via a company called Global Trading Solutions – a company long-linked as another arm of the exchange’s network of businesses.

Cermak also states, though, that there are currently problems with fiat withdrawals. What will also be interesting to see going forward is exactly how aware HSBC is of Global Trading Solution’s relationship with BitFinex and Tether – and whether it will continue to support the two when it releases the kind of spotlight that the two will bring in its direction in the coming days.