Is Bitfinex Planning to Raise Funds by Issuing Its Own BNB-Style Exchange Token?

According to reports from China, Dong Zhao, who is a prominent Bitfinex shareholder, a Bitcoin OTC trader, a founder of the blockchain-focused investment firm DGroup, and a crypto influencer in China, has confirmed that Hong Kong-based cryptocurrency exchange Bitfinex has plans to issue its own exchange token, and to sell it either via a private placement or an initial exchange offering (IEO).

As you probably know, on Thursday (April 25), New York Attorney General ("NYAG") Letitia James issued a press release to announce that her office had obtained a court order against iFinex (the operator of Bitfinex) and Tether Limited (the issuer of stablecoin Tether) "enjoining" the two firms "from further violations of New York law in connection with an ongoing activities that may have defrauded New York investors that trade in virtual or 'crypto' currency." 

The main allegations in this ex parte court order against the two respondents was that cash (and cash equivalents) backing the stablecoin had been used to help Bitfinex engage "in a cover-up to hide the apparent loss of $850 million dollars of co-mingled client and corporate funds." Apparently, Bitfinex, which had been having difficulties securing a stable traditional banking relationship, had used the services of Panamanian company Crypto Capital to process clients' fiat deposts/withdrawals, and $850 million was the amount of funds sent to Crypto Capital, which later had claimed that the funds had been seized by officials of Portuguese, Polish, and American governments as part of an on-going investigation into the financial activities of that company.

On Friday (late evening UTC time), April 26, Zhao told crypto news outlet Coindesk that he "he remains 'supportive' of both Bitfinex and Tether", that Giancarlo Devasini, Bitfinex’s CEO, had told him that "this is a temporary situation", and that "the exchange 'need[s] a few weeks and the funds will be unfrozen". This is a screenshot of Zhao's conversation with the Bitfinex CEO:

Conversation between Giancarlo and Dong Zhao About Bitfinex.jpg

Then, on Sunday (April 28), Zhao wrote on the microblogging platform Weibo (the Chinese equivalent of Twitter) that Bitfinex should issue an exchange token (something similar to Binance's BNB token) as a way of dealing with this cash crisis. Two days later, he confirmed on Weibo that Bitfinex was planning to issue such a token but that "the details are undecided." 

Here is what Dovey Wan, a founding partner of Primitive Ventures, wrote about this subject on Twitter on Tuesday (April 30):

Finally, at 20:55 UTC on Wednesday (May 1), Coindesk reported that Zhao had said on China's largest social media platform WeChat that Bitfinex may be holding a $1 billion token sale potentially as early as next week and that "individuals interested in participating should reach out to either him or to DFund, a group he founded." 

Coindesk's report on Zhao's WeChat post also says:

  • "There will be a minimum buy-in of $1 million, and a total supply of 1 billion tokens, available for $1 each" (with investors already promising to put in $500 million)
  • "Only qualified foreign investors will be allowed to invest” (and that "they must make a 'soft' commitment to the sale by Sunday")
  • "Once investors have been able to review the token’s white paper, they can choose to cancel their soft commitment or convert to a hard commitment, with a 10 percent deposit"
  • "“The system works on a first-in, first-served basis" such that if "the whole [1 billion is] fully allocated," there will be no need "to run the IEO to the retail channel" (i.e. "it will be like a private placement")
  • Bitfinex's token will be a 'hybrid' of BNB and BFX (described by Coindesk as "the token Bitfinex issued to customers who lost money in a 2016 hack, which was convertible to equity and was fully redeemed the following year"

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Bitfinex Wants to Offer 100x Leverage For Crypto Derivatives Trading

Michael LaVere
  • Bitfinex will offer 100x leverage trading for cryptocurrency derivatives
  • According to the exchange's CTO, the hedging product is "ready for prime time"

Cryptocurrency exchange Bitfinex revealed it wants to offer derivatives products with up to 100x leverage for cryptocurrency traders. 

Hedging On Cryptocurrency Derivatives

Chief Technology Officer Paolo Ardoino told The Block on June 25 that the cryptocurrency exchange was ready to ship a 100x leverage product for certain users. According to the post, the project has been under development for some time and is “now ready for prime time.” 

The product was referenced in last month’s whitepaper published by Bitfinex for its $1 billion private token sale of LEO, stating

“Qualified Bitfinex account holders will be able to trade a new hedging product through a derivatives wallet.”

The whitepaper originally claimed that the new hedging mechanism would be released by the end of June, a timetable that fits with Ardoino’s “ready for prime time” statement. 

Ardoino confirmed that only “verified” customers will be allowed access to the product, given the risks involved in such highly leveraged trades. 

The CTO also took to Twitter to quell user concerns over Bitfinex’s existing 3.3x margin trading. Ardoino explained 100x leverage will be “optional,” and that their current leveraged trading products will be unaffected by the release. 

Big Risk, Big Reward

Bitfinex is looking to compete with rival exchange BitMEX, who already offers 100x leverage through its bitcoin perpetual swap contract. However, Bitfinex claims its product is designed as a legitimate hedging tool for clients, rather than a gambling mechanism. 

Max Boonen, CEO of trading firm B2C2, believes the product will only appeal to retail hedgers, as large investors will shy away from the risks involved in 100x trading. 

According to Boonen, 

“There’s nothing wrong inherently about 100x. But as a commercial hedger you want lower leverage margin. The larger investor wouldn’t want to take the risk of 100X, typically. They don’t want to go balls to the wall.”

The cryptocurrency derivatives market has been heating up. Last week bitcoin-bull Mike Novogratz’s Galaxy Digital announced plans to offer cryptocurrency options contracts.

Binance has also reportedly been exploring futures trading. On June 24, Binance CEO Changpeng Zhao tweeted the exchange had executed its first margin liquidation for a BTC short.