Not an iFinex meeting (via Shutterstock).

Bitfinex owner plans to raise $1 billion in an exchange token offering

iFinex’s IEO will cover the $850 million cryptocurrency exchange Bitfinex said it lost to government seizures

There’s a new definition of chutzpah: covering your loss of $850 million by selling $1 billion worth of crypto tokens only good for a discount on your services. [Editor’s note: The previous definition of chutzpah, the saying goes, is someone convicted of murdering his parents pleading with the judge for mercy because he’s an orphan.]

Tether Watch

Now that word is out that cryptocurrency exchange Bitfinex is missing $850 million that it may or may not ever see again, parent company iFinex is trying to raise $1 billion by selling a new exchange token to be called a LEO.

Crypto over-the-counter trader Dong Zhao, the founder of the dFund venture capital firm and a Bitfinex investor, has tweeted out a marketing document he says describes iFinex’s plan for an initial exchange offering (IEO) of LEO tokens that will bring holders discounts on both Bitfinex and other iFinex exchanges, products, and services.

Each LEO token will be sold for 1 tether (USDT).

The money would allow Bitfinex to repay the more than $700 million the New York Attorney General revealed the exchange borrowed from another iFinex-owned company, stablecoin-issuer Tether. That in turn would allow Tether to return its dollar reserves to a full one-to-one match for each outstanding tether coin. Currently, Tether claims to have 74% dollar reserves, with the remainder in what amounts to an IOU from BitFinex—a company with which it shares senior executives.

New York Attorney General Latitia James obtained a court order on April 25, freezing Bitfinex’s ability to further access the $900 million line of credit Tether extended it. Bitfinex lost access to $850 million in possession of its payment processor, Crypto Capital Corp., which said it was seized by the governments of the United States, Portugal, and Poland. At least $50 million of that was seized by the Department of Justice when it arrested would-be Minnesota Vikings owner Reginald Fowler on charges including bank fraud and counterfeiting.

The bank fraud charges stem from Fowler’s alleged lying about the purpose of HSBC bank accounts opened in the U.S. for the purpose of helping Crypto Capital access dollars to let customers withdraw funds from BitFinex.

The document Zhao tweeted out—which says very clearly that it is not a formal offering, just marketing materials—said that 95% of the net funds recovered from Crypto Capital to buy and burn the LEO tokens. And, iFinex will also use 27% of its gross monthly revenues to do the same.

About $600 million of the offering has already been privately placed, according to The Block. The IEO will not be open to residents of the U.S. or Canada.

The IEO could drive down the price of Bitcoin (BTC), predicted Tom Lee, Fundstrat Global Advisor’s managing partner and head of research. “$1 billion IEO is a lot of ‘new’ token supply and probably has a short-term negative impact on $BTC #bitcoin and other crypto as the market needs to absorb this supply,” he said on Twitter on May 4. One reason for this, he pointed out, is that the one-day IEO will be equal to nearly four-and-one-half months of miners’ total daily Bitcoin sales.

The LEO exchange tokens will be “at the heart of the iFinex ecosystem,” the whitepaper said. Initial benefits will include:

  • A 15% reduction in taker fees for crypto-to-crypto and crypto-to-stablecoin trades
  • An additional 10% discount for traders who maintain an average monthly balance of 5,000 LEO tokens
  • A reduction in taker fees of up to 0.06% on crypto-to-fiat trades
  • Up to 25% of trading fees taken in LEO tokens

The LEO tokens will initially be listed on iFinex’s Bitfinex, EOSFinex, and EthFinex exchanges.

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Leo Jakobson, Modern Consensus editor-in-chief, is a New York-based journalist who has traveled the world writing about incentive travel. He has also covered consumer and employee engagement, small business, the East Coast side of the Internet boom and bust, and New York City crime, nightlife, and politics. Disclosure: Jakobson has put some 401k money into Grayscale Bitcoin Trust.