Controversial cryptocurrency company iFinex, operator of several crypto exchanges and the issuer of billion-dollar “stablecoin,” Tether, has issued a “marketing document” outlining its plans to create a new IEO (Initial Exchange Offering) token, LEO, that the company may use to cover operating expenses and hypothetically the alleged $850 million USD currently under seizure by Panamanian authorities.
According to the document, which was tweeted out by “China’s Bitcoin billionaire” and iFinex stakeholder, Zhao Dong:
“Leo tokens are intended to be the utility token at the heart of the iFinex ecosystem. Token holder will experience immediate benefits across iFinex trading platforms, products, and services…includ(ing)
- “…LEO holders’ taker fees will be reduced by 15% over all crypto-to-crypto pairs (including crypto to stablecoin)”
- “Taker fees…reduced by an additional 10% over all crypto pairs…for traders with an average >$5000 USDt in LEO tokens in their account during the previous month…etc.”
Bitfinex Official document about the LEO token pic.twitter.com/YR5FdS4iUY
— Dong Zhao (@zhaodong1982) May 4, 2019
The marketing document is not an official white paper and terms may be subject to change. For now, however, the plan is to sell LEO tokens at a rate of 1 USDt (tether) per, and the company promises to sell a maximum of 1 billion LEO tokens.
IEO’s (Initial Exchange Offerings) are the latest iteration of digital tokens being trotted out in “the cryptocurrency ecosystem.”
IEO’s are issued by exchanges and first sold to private investors based on the idea that they will eventually be made available for trading on the exchange, possibly to the general public.
iFinex says the initial listing of LEO tokens will occur on its Bitfinex, EthFinex and EOSfinex exchanges.
LEO tokens will be issued according to standard IEO terms, the marketing document states:
“(LEO tokens will be) sold in a private offering without any means of general solicitation of general advertising…tokens that remain may be sold in the manner and times determined by the issuer at its sole discretion.”
iFinex promises to engage in monthly buybacks of LEO tokens from the market, “…equal to a minimum of 27% of the consolidated gross revenues of iFinex from the previous month, until no more than 100 million LEO tokens remain…repurchases made at then-prevailing market rates may be used to pay fees may also be burned.”
The tokens will purportedly be hoovered up as the exchange recovers and applies funds seized in Panama from indicted partner firm, Crypto Capital (see below):
“…an amount equal to at least 95% of recovered net funds from Crypto Capital…will be used to repurchase and burn outstanding LEO tokens within 18 months from the date of the recovery.”
iFinex also promised to use any funds it may recover from a $65-72 million USD hack the Bitfinex exchange incurred in 2016 to buy back LEOs:
“Further, an amount equal to at least 80% of recovered net funds from the Bitfinex hack will be used to repurchase and burn outstanding LEO tokens within 18 months…of recovery.”
iFinex has used a similar token-creation scheme to cover shortfalls in the past.
In August 2016, hackers stole 119,756 bitcoins worth $65-72 million USD after breaching the Bitfinex platform. Bitfinex “socialized” the losses by dropping all customer balances by 36% and issuing and IOU in the form of BFX tokens in equivalent amounts.
The exchange announced 8 months later that it was buying back the IOU’s.
Anonymous Bitfinex critic “Bitfinex’ed” claims, however, that Bitfinex, “immediately start(ed) trying to convince people holding these IOU’s to convert to equity, or Bitfinex shares, at a value that Bitfinex themselves determined (with no completed audits to establish this value), at $1.00 a share.”
According to “Bitfinex’ed,” people who took the deal essentially (bailed out) a “shell corporation”:
“Once enough people fell for this scam, they used the funds they seized from their customers to pay off the ‘hold outs’, or the people who didn’t fall for the scam or couldn’t due to US regulations against scamming people…while proudly proclaiming that they ‘repaid’ all of their BFX tokens…with equity in an exchange with no functioning banking. An exchange that can’t exchange. Genius.”
Bitfinex has persistently had trouble maintaining the banking partnerships it needs to allow traders to on-board funds to the exchange.
This led to BitFinex partnering with Crypto Capital, a company now accused of providing “shadow banking” services to various cryptocurrency exchanges.
The head of Crypto Capital, Reginald Fowler, was arrested last week in Arizona and has been charged with bank fraud, conspiracy and operating an unlicensed money transmission business.
If convicted, Fowler could spend up to 30 years in jail.
Prosecutors have alleged that Fowler has the funds and connections to abscond and have asked that he be detained as a flight risk.
iFinex also came under ex parte orders in New York last week.
The orders also allege that iFinex engaged in fraud when it “co-mingled client and corporate funds” to cover the $850 million USD the company “lost” in Panama.
Bitfinex has countered that the funds were not in fact lost but were “seized” from Crypto Capital by Panamanian authorities, who are now “safeguard(ing)” the funds.
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