$1 Billion in Commitments Already Made for Bitfinex's Token Sale, Shareholder Claims

IFinex, Inc., the parent company which manages the operations of both its subsidiaries, Tether Ltd. and embattled crypto exchange Bitfinex, has reportedly acquired $1 billion in “hard and soft commitments” for its initial exchange offering (IEO).

This, according to a Bitfinex shareholder familiar with the matter, who revealed that there’s now a “high possibility” that the exchange operator “will not conduct a public sale” for its crypto token offering, known as LEO.

Hard And Soft Commitments Have Now Reached $1 Billion

Dong Zhao, a prominent Chinese shareholder and large volume over-the-counter (OTC) crypto trader, posted a message on WeChat (a popular Chinese social media network) which stated that the IEO had already received enough commitments to meet its fundraising target of $1 billion.

In statements shared with Coindesk, Zhao noted that the soft commitments received from investors meant that the potential USDT investments had not been locked in, which leaves the option open for backing out from the deal.

Investors Interested In Token Sale, Despite “$850 Million Missing”

Although Bitfinex’s management has still not raised adequate funds to meet the $1 billion fundraising target, the recent update from Zhao reveals that there’s considerable interest in acquiring LEO tokens.

This, despite Bitfinex being accused by the New York Attorney General’s (NYAG) Office of losing $850 million due to mismanagement of funds by Crypto Capital, the exchange operator’s payment processing service provider. The missing funds have reportedly been seized by government officials in Poland, Portugal, and the US. However, it is still unclear exactly why (or if) the funds are being held by authorities.

$20 Million Committed By Renrenbit Users

According to Zhao, his company has made a “hard” commitment by investing in Bitfinex’s IEO, however the Chinese entrepreneur did not disclose the amount invested. At present, Bitfinex’s management has not confirmed exactly how much it has received in investments.

Zhao also claims that users of his crypto-lending app, Renrenbit have so far invested $20 million (hard commitments).

On May 8th, 2019, IFinex announced the release of its whitepaper which confirmed that Bitfinex’s management was seeking to raise up to $1 billion through an IEO. The whitepaper also revealed that IFinex had made net profits of over $700 million during FY 2017/2018.

As explained in the whitepaper, if less than 1 billion LEO tokens are sold, iFinex may sell the remaining tokens after this token sale has concluded.

CME Looks to Double Bitcoin Futures Limit, but Is This Wise?

The Chicago Mercantile Exchange ( CME ) has a new request for its regulator, as it looks to double open position limits on bitcoin futures contracts in the face of significant interest.

Nasdaq reports that the CME has already petitioned its regulatory body, the Commodity Futures Trading Commission (CTFC), asking for an increase from 1000 contracts per spot month to 2000 per investor. Each contract represents five BTC, so essentially, at its peak,  a single investor's total position may edge towards a monumental 10,000 BTC.

This is in direct response to the contract's recent growth which is currently depicting record levels of activity, citing $370 million being traded per day. A spokesperson for the CME noted that the idea to increase limits was proposed on the continued maturity of the market:

Based on the significant growth and acceptance of our financially-settled CME Bitcoin futures markets, as well as our analysis of the underlying bitcoin market.

However, as Nasdaq writes the increase in the upper limit of positions is somewhat superfluous. As of July, the number of open interest contracts reached an all-time high of just 6100; given this, it seems the CME may be future-proofing.

Open to Manipulation?

However, concerns remain about the limit increase, as without them, the potential for manipulation rises; often to the detriment to the underlying asset. Although, as per the CTFC website, the threat of manipulation from bitcoin futures contracts is "low":

In general, position limits are not needed for markets where the threat of market manipulation is non-existent or very low.

Instead, Nasdaq posited that this might point to a lessening on the CTFC's strict rule of bitcoin; as well as a maturing of the market in general.

Nevertheless, some believe the CME's bitcoin futures contracts do pose a significant threat to the price of BTC; with some suggesting that blatant manipulation continues unchecked within the market.

As reported , there seems to be a correlation between the expiry dates of CME bitcoin futures contracts and a lull in the price point of BTC. In several instances, a significant drop in bitcoin's price has coincided with a closure from the CME. The most recent example of this occurred on Labor Day, September 2, when bitcoin rose an extraordinary 8% shortly after the CME shut.

Crypto analyst, Alex Kruger, highlighted this, noting the large gaps which formed on the CME chart, from the price discrepancy before and after closing.

This has become a pretty accepted practice within the market. Kruger has even gone to the lengths of compiling statistics each time this phenomenon transpired:

On these occasions, bitcoin cited an average 4.6% price discrepancy following the close of the CME.

Whether this is a coincidence or the market is indeed being actively manipulated is as yet unclear. Either way, with the increase of these limits it might be only a matter of time until we know for sure.

Featured Image Credit: Photo via Pixabay.com