Bitfinex Releases Whitepaper to Confirm $1 Billion Initial Exchange Offering

Cryptoasset exchange Bitfinex has confirmed that it is planning to raise $1 billion through an initial exchange offering (IEO).

Bitfinex, which operates under its parent company iFinex, Inc., a British Virgin Islands incorporated and Hong Kong-operated financial technology firm, has released a whitepaper, titled “Initial Exchange Offering of LEO Tokens For Use on iFinex Trading Platforms.”

$1 Billion LEO Token Sale, Not For US-based Investors

The whitepaper, which was published on May 8th, 2019, clarifies that the LEO tokens will not be sold to US-based investors. Transactions involving the exchange’s new token may also be prohibited in other jurisdictions, IFinex's paper states.

According to iFinex’s latest whitepaper, the firm made net profits of around $730 million for FY 2017/2018, however the New York Attorney General recently alleged that the company may have lost $850 million - after it began working with Crypto Capital, a cryptocurrency payment processing service provider.

Private Token Sale Will End On May 11th, 2019

Although the whitepaper regarding Bitfinex’s IEO has now been officially released, there had been unconfirmed reports earlier that the exchange operator’s management was planning to raise funds through a token sale.

As confirmed in the whitepaper, Bitfinex’s management intends to sell up to 1 billion LEO tokens, with each worth 1 USDT. The private token sale will reportedly end on May 11th, 2019.

If required, a public token sale may be launched afterwards in order to meet the fundraising target.

Those who purchase LEO tokens may use them for transactions conducted on Bitfinex or for various other purposes, the whitepaper noted. Meanwhile, Bitfinex’s management might try to use the funds raised to recover from the potential losses incurred due to the alleged mismanagement of funds by Crypto Capital.

Public Token Sale Will Be Conducted If “Fewer Than 1 Billion USDT Tokens Sold”

However, it is still unclear whether the funds ($850 million) have actually been seized by American, Portuguese, and Polish authorities - as Crypto Capital had claimed earlier.

As noted in the whitepaper, if less than 1 billion LEO tokens are sold iFinex may sell the remaining tokens after this token sale has concluded. At present, IFinex, Inc. is still contesting the charges it faces, from the New York Attorney General, in a US court.

Bitfinex Investors Not Concerned About Fraud Allegations

Last month, Bitfinex shareholder Zhao Dong had been trying to reassure crypto industry participants that the exchange is solvent. According to the prominent shareholder, Giancarlo Devasini, the Chief Financial Officer at Bitfinex, had told investors that the situation they were facing was temporary and that the funds would be recovered soon.

Notably, Dong has also been accepting pre-orders for Bitfinex’s upcoming token sale through his crypto-lending application Renrenbit. The well-known investor had reportedly taken pre-orders from users who wanted to participate in the public phase of Bitfinex’s upcoming $1 billion token sale, even before IFinex published an official whitepaper for it.

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.

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