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Bitfinex may issue exchange tokens to cover potential loss of $850 million

Tokens would make up for funds seized from Bitfinex by several governments, although the company says it expect their release ‘imminently’

Talk about Chutzpah. Embattled cryptocurrency exchange Bitfinex may be planning to issue a proprietary exchange token to cover the potential loss of $850 million, according to the founder of cryptocurrency venture capital firm dFund.

Embattled cryptocurrency exchange Bitfinex may be planning to issue a proprietary exchange token to cover the potential loss of $850 million, according to the founder of cryptocurrency venture capital firm dFund.

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Dong Zhao, a well-known Chinese Bitcoin billionaire and Bitfinex shareholder told Coindesk that while the plan to issue an exchange token has not been finalized, he believes it will happen.

An exchange token generally offers a stake in a cryptocurrency exchange, offering holders benefits ranging from a share in revenues generated by trading fees, to trading fee discounts, to voting rights for decisions made by the exchange on things like what cryptocurrencies to list. They do not, however, represent stock in the company or offer shareholder rights. No details on what the Bitfinex token would offer have been made.

Zhao said he recommended issuing $850 million in exchange tokens, matching the $850 million of Bitfinex funds that the Hong Kong-headquartered, British Virgin Islands-based firm says has been seized by government authorities in the U.S., U.K., Poland, and Portugal from Bitfinex’s payment processor, Crypto Capital Corp.

Suggesting that the tokens be distributed “through pre-paid trading fee packages,” Zhao noted exchange tokens “have better liquidity,” than other types of tokens, which he said were all “shitcoins.”

As Coindesk also noted, Zhao said Bitfinex CFO Giancarlo Devasini expects the seized funds to be recovered within “a few weeks.”

That timeline is hard to reconcile with a sworn statement made on April 30 by Stuart Hoegner, the general counsel of Bitfinex and its sister company, stablecoin-issuer Tether. He said that in December 2018, the companies grew so concerned that Crypto Capital might fail to return their funds that it contacted the New York Attorney General and various federal law enforcement agencies.

Such concern also led Bitfinex to negotiate a $900 million line of credit from Tether, both of which are owned by iFinix and share senior executives. On April 25, New York State Attorney General Latitia James obtained a court order freezing that line of credit.

In asking the court to restore Bitfinex’s access to the credit line, Hoegner said that “Crypto Capital continually represented to senior executives of Bitfinex that funds held with Crypto Capital had been seized by several governments, and were expected to be released imminently.”

Yet, Hoegner also noted that only one unspecified jurisdiction had even confirmed that it seized Bitfinex’s funds from Crypto Capital.

Leo Jakobson, Modern Consensus senior editor, is a New York-based journalist who has traveled the world writing about meeting and incentive travel, as well as the consumer and employee loyalty business. He also covered the East Coast side of the Internet boom and bust, small businesses, and New York City crime, nightlife, and politics. Disclosure: Jakobson owns no cryptocurrencies.

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