Leading cryptocurrency data tracker CoinMarketCap has excluded Bitfinex from the aggregated price of Bitcoin (BTC). Bitfinex, one of the world’s leading crypto exchanges, is the subject of a host of accusations made by the New York Attorney General’s office. The growing scandal implicates businessman Reginald Fowler, a one-time minority stakeholder in the NFL’s Minnesota Vikings.
While Bitfinex is still listed on CoinMarketCap, its BTC price shows an asterisk, denoting exclusion. Bitcoin is trading for $6,050 on Bitfinex compared to CMC’s aggregate price of $5,768, at time of writing.
A detailed report from the NYAG’s office alleges that iFinex Inc., which operates both Bitfinex and Tether, has engaged in a series of fraudulent activities, resulting in a multi-million-dollar cover-up involving customers’ funds. Bitfinex, headquartered in Hong Kong and registered in the British Virgin Islands, is a leading cryptocurrency exchange, and Tether (USDT) is the world’s leading stablecoin, used by crypto traders to escape market volatility.
In the immediate aftermath of the AG’s legal filing on April 25, which accuses the exchange of covering up $850 million in losses, traders pulled $175 million in Bitcoin, XRP and Ethereum out of the embattled exchange, with data trackers monitoring movements by large crypto investors, also known as whales. Whale watchers tracked $243 million in withdrawals from Bitfinex by May 1.
News of the cover-up triggered an increase in the “Tether risk premium,”? which increased the price of Bitcoin on Bitfinex where there’s a high trading volume of the BTC/USDT pair.
By eliminating the controversial exchange’s higher Bitcoin price, CoinMarketCap reduces the skew, reflecting a more conservative figure for the world’s number one cryptocurrency.
While the revelations about alleged crimes involving Bitfinex have not dampened the crypto market rally, with Bitcoin rising to $5,768 at time of writing, an increase of 11% since the release of the AG’s legal filing, the fall-out from the scandal continues.
Federal prosecutors announced on April 30 that a grand jury has indicted Arizona businessman Reginald Fowler.
According to the legal filing, Fowler is accused of operating an unlicensed money transmitting business with ties to Bitfinex, presumably in conjunction with the third-party company Crypto Capital, alleged to be in possession of the exchange’s $850 million.
“Defendant has been charged with bank fraud, conspiracy to commit bank fraud, operation of an unlicensed money transmitting business, and conspiracy to operate an unlicensed money transmitting business. These crimes all relate to Defendant’s alleged involvement in a scheme to operate a shadow bank on behalf of cryptocurrency exchanges in which hundreds of millions of dollars passed through accounts controlled by Defendant in jurisdictions around the world.”
According to the indictment, email search warrants unearthed a document entitled ‘Master US Workbook.’
“This workbook indicates that the scheme had received over $740 million in 2018 alone. It lists approximately sixty different bank accounts, held at both domestic and international banks, with a combined account balance of over $345 million as of January 2019. Notably, this workbook indicates that approximately $50 million is held in domestic accounts, with the rest located abroad.”
Sports Illustrated reports that Fowler, in a separate business dealing, was involved in funding for the now-defunct Alliance of American Football (AAF), founded in February as a feeder league for the NFL. The businessman had pledged roughly $25 million to the AAF as the league’s primary investor. But the funds were inexplicably held up around Christmas.
According to Sports Illustrated, Tom Dundon, majority owner and chief executive officer of the Carolina Hurricanes, was named chairman of the AAF with Fowler in the wings as a lead investor.
“The email from Ebersol to the entire Alliance went out on Feb. 22, 2019, at 5:34 p.m. ET.
This week, all of your hard work was validated and our company secured the necessary funding to accelerate growth into our next phase as a business. Tom Dundon, [now] our largest institutional investor and the control owner, will serve as chairman of the Alliance Board of Directors.?.?.?. He is excited and fired up about what we’ve created, and ready to propel the league forward for many years to come….”
“Around the same time that Fowler was theoretically engaging in discussions about funding the new football league, authorities allege he was also operating ‘shadow banking services’ on behalf of a crypto currency exchange company that misrepresented money transfers and skirted international ‘anti-money laundering verification services’.”
NBC Sports, reporting on Fowler’s unrelated cryptocurrency operation, asks how Fowler got approved as the main investor for the AAF initiative.
“How did he get approved? Was he just the only guy who was willing to do it? And if this is the best you have, don’t you just say at that point, ‘Maybe we’re not going to go forward with this?'”
Fowler was arrested on Tuesday. Under investigation by the FBI since last year, he was accused of “disregarding” the bureau’s efforts and was considered a flight risk. His Israeli co-conspirator, Ravid Yosef, remains at large.
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