Federal prosecutors suspect the man behind Bitfinex’s “missing” $850 million stole at least $60 million of it, and may also be involved in counterfeiting U.S. currency.
In a document filed May 1, the office of the U.S. Attorney for the District of Arizona asked the court to hold Reginald Fowler without bail as a flight risk, citing both the staggering amount of Bitfinex’s money he has access to around the world—including at least $60 million he allegedly siphoned off—as well as uncut sheets of counterfeit $100 bills the FBI allegedly found in his home. He also allegedly tried to use fake bond certificates worth billions to obtain bank loans.
As Modern Consensus reported on May 1, Bitfinex used payment processor Crypto Capital as a “shadow bank” after being cut off by mainstream banks from a source of U.S. dollars with which to pay clients. Crypto Capital, in turn, used Fowler, who once tried to buy the NFL’s Minnesota Vikings. He opened up accounts in banks including HSBC—claiming they were being used for real estate transactions—to send money to and from U.S. clients of Bitfinex and other cryptocurrency exchanges.
Crypto Capital ran more than $740 million through Fowler in 2018 alone, the government claims. By the end of the year, Crypto Capital told Bitfinex that it lost access to $850 million seized by U.S. and European government, precipitating a liquidity crisis at the Hong Kong-headquartered cryptocurrency exchange. That led Bitfinex to borrow hundreds of millions of dollars from its sister company, stablecoin-issuer Tether, which in turn forced it to back away from claims that its tokens were backed one-to-one by a reserve of U.S. dollars.
But the news gets worse for Bitfinex.
According to a “Master US Workbook” of Fowler’s that First Assistant U.S. Attorney Elizabeth Strange told the court the government has found, as of January 2019, he had $345 million of Bitfinex’s money spread across some 60 different bank accounts around the world, only $50 million of it in the U.S. The U.S. has seized that $50 million.
“Assuming these figures remain remotely accurate, Defendant has access to funds on which he could live indefinitely,” Strange told the court. “Moreover, Defendant has shown a willingness to help himself to these funds in the past. For instance, between in or about June 2018 and in or about July 2018, Defendant sent approximately $60 million from scheme accounts to his personal bank accounts.”
That came from a “10% Fund” he and alleged partner Ravid Yosef set up to drain funds from deposits made by Crypto Capital. The government has not yet been able to locate that $60 million, Strange said.
Beyond that, Fowler attempted to use Crypto Capital’s money as security for bank loans, and apparently did the same with faked bond certificates worth billions.
Strange also said that when contacted by the FBI, Fowler agreed to cooperate in the investigation in hopes of avoiding criminal penalties, but instead warned co-conspirators of the investigation. Without identifying them, Strange said that Yosef was not the only other person working with Fowler.
If the U.S. Attorney’s claims are accurate, Bitfinex may have a bigger problem than just having its client’s money seized by governments of the U.S., U.K., Poland, and Portugal. It is not clear from Strange’s filing if U.S. authorities even know where most of the money is.
It’s worth going back to that $345 million, $295 million of which remains in banks outside the U.S. What the government said about it bears repeating: “Assuming these figures remain remotely accurate, [Fowler] has access to funds on which he could live indefinitely.”
Which seems to translate to, “We have no idea where this money is.”
The filing concludes: “Defendant is a serious flight risk and danger to the community because he has access to hundreds of millions of dollars in foreign bank accounts, has shown little respect for the criminal justice process, and appears to be involved in numerous fraudulent schemes beyond the charged conduct.”