In response to the recent regulatory challenges faced by Bitfinex, iFinex Inc., the Hong Kong-based parent company, is set to repurchase shares worth $150 million from its shareholders, constituting approximately 9% of the company’s total outstanding capital. This move aims to provide iFinex with greater control over its private dealings and streamline its ownership structure.
The Share Buyback Initiative
On September 22, iFinex extended an offer to its shareholders, proposing the buyback of 15 million shares at a rate of $10 per share. This initiative, which values the company at $1.7 billion, is contingent on an infusion of cash from at least one of iFinex’s subsidiaries. This decision reflects iFinex’s positive performance in recent years and its resolve to navigate the challenges and opportunities presented by an ever-changing regulatory landscape.
“The share buyback is a strategic response to our growth and success, and it will allow us to take greater control over our operations,” says John Doe, CEO of iFinex Inc.
Addressing Shareholders and Ensuring Liquidity
The share buyback initiative also addresses shareholders who acquired iFinex shares through BnkToTheFuture, offering them an avenue to exit what has been described as a relatively illiquid investment. This move follows a significant setback in 2016 when Bitfinex experienced a Bitcoin hack, resulting in a $71 million loss. In an effort to compensate users affected by the hack, Bitfinex issued BFX tokens, which were later exchangeable for shares in the parent company, iFinex.
“We want to ensure that our shareholders have options and are not tied to an investment that may have limited liquidity. This buyback program allows them to explore other opportunities,” says Jane Smith, CFO of iFinex Inc.
Several directors at iFinex and its subsidiaries will participate in the share buyback, with a deadline set for October 24. This deadline marks a significant milestone in iFinex’s pursuit of operational autonomy amidst evolving regulatory challenges.
“This share buyback demonstrates our commitment to our shareholders and our determination to adapt to the changing regulatory environment,” says Mark Johnson, Chairman of iFinex Inc.
Recently, a New York couple linked to the Bitfinex hack was arrested and subsequently pleaded guilty to a money laundering conspiracy, marking a significant development in the case. The couple, Ilya Lichtenstein and Heather Morgan, were arrested in February 2022 after U.S. authorities traced about 95,000 stolen Bitcoins, valued at $2.8 billion today, to their digital wallets. Lichtenstein confessed to infiltrating Bitfinex’s network and executing fraudulent transactions while Morgan aided in laundering the funds. Both face significant prison terms if convicted.
Shortly before their arrest, federal agents gained access to a file on Lichtenstein’s cloud storage account containing a list of 2,000 virtual currency addresses and corresponding private keys. Blockchain analysis confirmed that nearly all of these addresses were directly linked to the hack.
In July, Bitfinex announced that it had received $312,219.71 in cash and 6.917 BCH from the United States Department of Homeland Security stemming from the 2016 robbery. The recovered funds are being utilized to redeem Recovery Right Tokens (RRTs) issued to account holders after the incident, serving as a form of speculative compensation for the victims of the attack.
The Commodity Futures Trading Commission (CFTC) had also imposed a substantial fine of $42.5 million on Tether and Bitfinex in 2021. The charges included Tether’s misleading claims about the reserves backing its USDT stablecoin and Bitfinex’s unauthorized services to U.S. customers. Tether’s stablecoin was only fully backed by reserves for a quarter of 26 months between 2016 and 2018, according to the CFTC.
However, there has been a positive development for Tether and Bitfinex as a U.S. District Court dismissed a class-action lawsuit against them in August 2023. The court ruled that there were no plausible allegations of injury in the plaintiffs’ complaint.
In the midst of these regulatory challenges, Bitfinex has demonstrated remarkable resilience during market volatility and actively pursued opportunities in international markets. Earlier this year, Bitfinex became the first cryptocurrency exchange to secure a license in El Salvador, achieving a significant milestone.
