Cryptocurrency Exchange Bitfinex Under Scrutiny After Tether’s $31 Million Hack

The cryptocurrency market valuations have surged to a record high of over $250 billion with an unprecedented cash flow and liquidity in the past one week. Although a lot of optimism has built around cryptocurrencies being considered as a good investment tool, the security of operation of the exchanges still remains in question.

In yet another ugly incident of an online theft, cryptocurrency startup Tether reported that $31 million worth of USDT tokens were being stolen from its wallet through malicious action by an external attacker.” The attacker is accused of stealing USDT tokens and sending them to an unknown address. The development team at Tether was quick to react to this by quickly releasing an important update to its Omni Core software through a hard fork in an attempt to isolate the stolen tokens and freeze them from further being converted to fiat currency.

However, there has been a growing suspicion over the Tether hack with an increasing number of questions being pointed towards one of the most popular cryptocurrency exchanges - Bitfinex. The story rolls back to last year, when the exchange reported 119,756 bitcoin tokens being robbed from its exchange which were worth around $72 million, then. Ever since then Bitfinex has remained mum on this matter and has been unwilling to unveil anything regarding this matter.

Also, after Bitfinex losing its associated banking earlier this year, the exchange is accused of an inflated supply of Tether’s USDT tokens in order to remain solvent. CoinDesk recently reported that the exchange remains under scrutiny for its long-standing allegations the exchange has been using the asset to engage in fraud and market manipulation.”

Recently, after so much of mounting allegations and increasing suspicion, the exchange was forced to break its silence. On Nov 19, Bitfinex tweeted Bitfinex is solvent and both fiat and crypto withdrawals are functioning as normal. We are seeing increasing FUD which we believe is a co-ordinated attack to create a market disruptive event”. It further said in its next tweet “A formal announcement is forthcoming”. Soon two days later on Nov 21, Tether released the news of around $31 million worth of tokens being stolen from its wallet, and now we have yet to hear the formal announcement from Bitfinex. All these systematic turns of events cause to raise more eyes of suspicion towards Bitfinex and one of the most pertinent questions now is that: Are we waiting for another Mt. Gox in the making?

Emin Gün Sirer, an associate professor of computer science at Cornell University, holds a profound track record for predicting problems in this rising cryptocurrency industry. In regard to all the story circulating around Bitfinex, he recently said I’m worried about the systemic risk that this centralized company poses, and I’m worried that if they go down, they will take down the space with them.”

Adding more spice to the curry, Paradise Papers has recently revealed the names of Bitfinex’s Giancarlo Devasini and Philip Potter, in a massive data leak. the data has a list of individuals and companies opting for services from offshore service provides operating in ‘tax havens’. The Papers reveal that Mr. Potter is the director of Tether and Mr. Devasini is the shareholder in this company. If the dots are to be joined it certainly puts more weight on the suspicious relationship between Bitfinex and Tether. It will be interesting to see what follows ahead and how early will Bitfinex come clean on all these matters.