The NYAG who started the case against Bitfinex and Tether a couple of months back has taken a relentless approach. The court dismissed the previous case. However, the NYAG accused Bitfinex of secretly serving US clients.
The Exchange lawyers responded by saying that the particular cases that the AG is imposing on them are actually ‘isolated instances’ over which the company rarely has a control. His Counsel which included Steptoe & Johnson LLP and Morgan, Lewis & Bockius LLP wrote:
OAG tries to confuse matters by referring to isolated instances where Respondents’ foreign customers have shareholders or other personnel in New York. But in those circumstances, Respondents’ counterparties — the ones with which Respondents actually transacted business — are the foreign entities.”
Bitfinex Vs. Crypto Media
Reportedly, Frank Chapprano from The Block recently accused Bitfinex of too easily allowing US customers to bypass bans. An instance was cited from 7th July 2019, where a US resident was able to access the platform to execute orders without hinderances.
Apparently, all it takes is an answer to a pop-up window with a YES or a NO to overcome restrictions. Eventually, the Exchange requires for KYC documents. However, in this case, the user was successfully able to deposit and withdraw despite the ban. He even left a note to shame the site,
I am a NY resident
The news started spreading rather quickly – here is the report. Nevertheless, the Exchange’s response, which was included noted that the user was an isolated incident. The Exchange said in a blog post,
We correctly flagged this user’s IP address as being in the U.S. Notwithstanding the U.S. IP address — which may be used by Bitfinex customers, as appropriate — our system logs demonstrate that this user represented to us several times that he was not an individual resident in the U.S. This person has lied to Bitfinex on multiple occasions, deliberately and wrongly concealed his location, and flagrantly violated our terms of service.
What We Think
The wall that Bitfinex has built to restrict service to US customers has a big gaping hole in it. The Exchange did and would eventually identify the individuals in the cases involved. However, their KYC compliance for operating on the Exchange seems to be weak.
Nevertheless, large deposits or withdrawal would eventually Require KYC and AML compliances. Hence, it is highly unlikely like a vast money-laundering racket, or illegal business can be conducted by exploiting the glitch. We have requested the details and practices followed at the Exchange regarding the same.
The crypto industry is in the budding phases, and there is no standard procedure of anything. Hence, we at CoinGape think that it will provide an opportunity for growth. All Exchanges, including Bitfinex facing the issue, will look to improve their security.
Do you think that such attacks are good for the industry? Please share your views with us.