The problems facing the Bitfinex cryptocurrency exchange and the missing millions are starting to take their toll on the company. The exchange found itself suddenly out of $850 million when a banking partner, Crypto Capital, “lost” the funds, so it turned to partner Tether for some help. That set in motion a series of negative actions that are still ongoing and, in the meantime, Bitfinex can only watch as its BTC-USD market share continues to slide.
Bitfinex and Tether were targeted by the New York Attorney General’s (NYAG) Office after an arrangement that saw the exchange receive a loan from Tether to cover the losses. At the same time, Bitfinex reportedly tried to cover up the whole ordeal, which, in light of the lawsuit by NYAG Letitia James, only exacerbates the issue. Tether’s decision to provide the funds, essentially off the books, didn’t help the matter either.
Revelations that the two were servicing customers in New York only made the situation worse. The pair of companies argued that New York couldn’t go after them since they didn’t operate in the state, but James was able to produce documents that proved that assertion to be false.
That lawsuit is still continuing and will for quite some time. As it pushes slowly forward, Bitfinex and Tether are beginning to see the fallout from their actions and are also looking at the potential for a number of investor lawsuits to be filed. One is already underway, and could be given class-action status. Were that to happen, operations would most likely take a huge drop south for the companies.
Some of that can already be seen. According to Coin Metrics, in its State of the Network report, Bitfinex is losing ground against other crypto exchanges. In May, the exchange was relatively high among competitors, but has fallen a couple of notches. This can’t be tied directly to interest in crypto trading, as several of the top exchanges continue to increase their activity. Other exchanges have been able to take advantage of the situation to attract new clients by offering lower fees and other incentives, and this is going to continue to cause Bitfinex to lose ground as the crypto market grows.
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