Bitfinex’ed doxxed, Tether update

crypto.inferno (67)in #bitcoin • 6 years ago

We’ve never made any secret of our dislike of Tether, the centralised USD token. Supposedly, every token is backed by real dollars, but Tether’s reticence to provide an audit means there has long been doubt about that within the crypto community, and the company has been harshly criticised for its many apparent crimes.

And there has been no harsher critic than ‘Bitfinex’ed’, the once-anonymous blogger who has kept up the pressure on Tether and Bitfinex (the two companies share the same management, presenting a clear conflict of interests) for months. Bitfinex’ed himself has been a highly controversial figure. Some in the community see him as shining light on a very murky area of crypto; others as a FUDder and anti-crypto shill.

Bitfinex’ed has been careful about his anonymity, which is understandable given the threats he has received. But not careful enough, it seems: his identity was recently exposed.

The analysis linked above is well worth a read, because it’s a decent piece of investigation. The chief evidence is a series of unusual phrases seen in Bitfinex’ed tweets and articles. None on its own is convincing; together they present a compelling picture. Statistically, there’s little question about it. And it’s a cautionary tale of how you can disguise your identity, use Tor and a bunch of other privacy tools, and be given away because you leaked information in some small and unexpected way – like through your use of certain expressions. So kudos to author ‘thinkexclamation’ for the work.

We only hope you’re prepared for what might follow. We link the article here because it’s already in the public domain – and yes, it is a good piece of investigation – and anyone who wanted to know who Bitfinex’ed really is already does. But whatever you think of the guy, there’s a very real risk of him being targeted now.

And what about Tether?

In other Tether-related news, the spread between Bitfinex and ‘real’ USD exchanges like Bitstamp is now down to historical levels, just $60-70. This premium likely represents nothing more than the friction of getting money into and out of the Tether system, something only a few people can do anyway. It is possible to arbitrage those prices, but only if you have the right relationship with Tether (and possibly only if you are Tether). It would look like this:

Deposit funds to Coinbase
Buy BTC with deposited funds
Move BTC to Bitfinex
Buy USDT at a discount to the dollar using BTC
Cash out USDT for real dollars
Profit

However, aside from needing that relationship with Tether, you’d probably need to be doing this with significant volume to make profit, given bank charges and fees – likely five or six figures of USD before it was worthwhile.

It looks like that’s what Tether itself has been doing, buying up underpriced USDT and cashing them out for real USD. $800 million has come off Tether’s market cap in recent weeks, which likely represents many millions or even tens of millions of dollars of profit for someone. It also looks like Kraken has been acting as a conduit for this arbitrage.

All of this is encouraging, in its own way. It means that Tether most probably has not been running a fractional reserve and does not pose a systemic risk. They may be shady, sure, but their crime is not the one Bitfinex’ed has been claiming. Our former analysis stands.

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