Oct 10, 2023

Bitfinex Crypto Exchange Owner Makes $150 Million Share Buyback Offer to Hack Victims

Emily Nicolle, Bloomberg News

The Bitfinex logo on a smartphone arranged in the Brooklyn Borough of New York, U.S., on Monday, May 24, 2021. Elon Musk continued to toy with the price of Bitcoin Monday, taking to Twitter to indicate support for what he says is an effort by miners to make their operations greener. Photographer: Gabby Jones/Bloomberg , Bloomberg

(Bloomberg) -- The owner of crypto exchange Bitfinex is exploring a $150 million share buyback that would provide it with greater control over the private company’s dealings, particularly as regulatory scrutiny on the industry heats up.

iFinex Inc., the Hong Kong-based firm which shares directors with crypto’s largest stablecoin issuer Tether Holdings Ltd., wrote to shareholders on Sept. 22 with an offer of $10 per share for 15 million shares, according to a document seen by Bloomberg News. The deal, which represents around 9% of iFinex’s outstanding capital and values the business at $1.7 billion, would depend on the business receiving an influx of cash from at least one of its subsidiaries, the proposal said.

The arrangement was offered to shareholders who bought iFinex stock as part of a 2016 swap arrangement with investment platform BnkToTheFuture. That year, around $71 million in Bitcoin was stolen from Bitfinex in a hack — a token pile now worth closer to $3.3 billion. Bitfinex offered to make users whole by providing them with BFX tokens, which iFinex later redeemed in exchange for shares in its company via BnkToTheFuture.

The buyback is the result of “positive performance” by the company over the last few years, iFinex said in a statement to Bloomberg News. Tether said in a statement that it is a distinct company from iFinex, though it has shareholders in common. Simon Dixon, chief executive of BnkToTheFuture, said he cannot comment on confidential client information.

By selling back their shares, iFinex said investors would alleviate increasing demands on them “to provide information to support the Bitfinex Group’s regulatory applications and to address scrutiny,” as well as exit what’s been a relatively illiquid investment.

Tether and Bitfinex have weathered regulatory issues in the past. The companies were fined a total of $42.5 million by US-based regulators in 2021 to settle allegations that Tether lied about the reserves backing its USDT stablecoin, and that Bitfinex serviced US customers without proper approval. Tether’s USDT is crypto’s most traded token with $83.5 billion in circulation at present, according to pricing data from CoinGecko, while a July quarterly attestation of its reserves said the company had amassed $3.3 billion in excess capital.

Stablecoins are digital tokens usually designed to keep a one-to-one value with a less volatile asset like the dollar, typically by holding equal reserves of cash and cash-equivalent assets as collateral. They’re commonly used by traders as a way of transferring funds between exchanges and as a safe haven from price swings, making them some of crypto’s most-traded tokens.

Read: Why Do Tether and Its USDT Coin Make People Nervous?: QuickTake

Attention on crypto businesses has also increased in recent years as watchdogs have cracked down on companies operating beyond existing regulatory purviews. Legislation to govern stablecoins like USDT and their issuers has been in the pipeline for several years in countries like the US, the UK and the European Union. Meanwhile, a spate of high-profile collapses and fraud scandals last year — most notably the failure of FTX, whose founder Sam Bankman-Fried stands trial in the US this month — has intensified the already significant spotlight on the industry.

Interested Parties

A number of directors at iFinex and its subsidiaries will be allowed to participate in the buyback, the document said. Giancarlo Devasini, a former plastic surgeon who now acts as chief financial officer for both Tether and Bitfinex, was named in the document as a direct shareholder who is permitted to take part in the deal.

There is no threshold on how many shares must be put up for sale in order for the buyback to go through, the document added, with iFinex willing to buy as many as are made available until the maximum amount is reached. The company’s valuation was devised internally based on various business metrics, it said, with no independent third party sought to concur with the company’s assessment of its own worth. Shareholders have until Oct. 24 to indicate whether they wish to sell their holdings to iFinex.

Growth in circulation of Tether’s USDT has risen dramatically this year as other stablecoins have lost market share. USDT is backed by a reserve made up largely of exposure to short-dated US Treasury bills, netting Tether a tidy profit while returns on government bonds are high. The issuer has been utilizing its growing excess capital cushion in recent months to invest in new projects, such as technology provider Northern Data Group.