Bitfinex’s compensation could be just a dream with traders already focusing on legal action after the 36% ‘haircut’.
The exchange has been looking for a way how to compensate $72 million in stolen funds through a replacement of 36% of customer balances with its own BFX tokens.
“The BFX tokens will remain outstanding until repaid in full by Bitfinex or exchanged for shares of iFinex Inc,” according to a statement from August 6.
This led to a fury and criticism. Legal worries due to the nature of the tokens and what traders could do with them have been augmented by threats from traders themselves to pursue criminal proceedings against Bitfinex.
“If they are issuing an equity interest in their parent company, I don’t really think the fact that it’s evidenced through an electronic token […] really changes the analysis of whether it’s a security,” according to Securities trading specialist Zach Zweihorn.
Traders themselves have also come out to voice their frustration en masse.
“Basically they took customers’ funds in order to try to stay afloat. Nowhere in their terms of service did it mention that this was a possibility,” one investor said, adding that he “felt like he was robbed.”
Nevertheless, other parties are warning that the tokens would be a more likely source of compensation than any kind of legal action. Pushing the exchange to court could cause the cancellation of the plan, leaving an even bigger black hole unfilled.
“It might be a pyrrhic victory,” Bitcoin Foundation co-founder Patrick Murck said. “You might still end up with less money.”
Additionally, Reddit has become a predictably vast discussion board about the issue, with users also taking the opportunity to defend Bitfinex’s original plan.
“Any forcing of them to make good on large sums will push them through that costly process where you just get a slow-motion haircut […] Injunctions or any moves to force them into the process before implementing the haircut+token plan will not get more than 64% of your funds back.”
Meanwhile, Bitfinex is pressing ahead with the incremental reopening of its exchange platform.
“We are aware that many questions remain and we intend to discuss the theft, the distribution of losses, and our recovery plan in follow-up announcements. We are trying to be as transparent as we can be while we continue to try to make the best of a terrible situation,” according to the statement, made in August 10.
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