The saga of the Bitfinex hack is far from over by the look of things. A new update provided by the company hints at how all of the exchange’s users will be sharing in the losses suffered. With US$65m being stolen, this seems a very strange approach by the company, to say the least. It also raises more questions regarding their solvency as a result of this hack.
As part of this new clever scheme devised by Bitfinex, they will put the responsibility of the funds lost on the shoulders of all platform users. To be more specific, it does not matter whether or not one was affected by the Bitfinex hack, as all users will see their account balances reduced to foot the bill for the US$65m in stolen funds.
This decision makes zero sense in the grand scheme of things, though. While it is somewhat acceptable to have affected users take the financial loss, other users’ balances should remain unaffected. For some reason, that would not help
Bitfinex all that much, by the look of things. It will be interesting to see how the community responds to this news, though.
Assuming Bitfinex goes ahead with this plan – as there is no one to stop them trying for now – they will end up being abandoned by all Bitcoin traders. This level of shenanigans is nothing more than a glorified bail-in, where the exchange takes funds of its users to fill an existing gap. To a lot of users, this is very similar as to how central banks operate these days.
It is not unlikely we will see a lot of legal repercussions for both Bitfinex and BitGo if they decide to go ahead with this idea. Since both companies have a joint responsibility to safeguard users funds – and utterly failed at doing so – it is not unlikely some court cases will be opened. Then again, it remains to be seen how judges would respond to this issue, as there are no clear legal definitions for this type of activity.
One possible silver lining is how Bitfinex will attempt to repay its users over time if they decide to lower account balances. Then again, the company only makes money from trading fees or investors. If people leave the platform, neither of those avenues will bring any significant money in the future.
The bigger concern is Bitfinex’s solvency, as they seem unable to cover this financial loss themselves.Image credit 1
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