Many Bitfinex Token Holders Agree To Equity Exchange

Bitfinex, a cryptocurrency exchange, announced Thursday (Oct. 27) that many of its largest BFX token holders have agreed to exchange over 20 million BFX tokens for equity in Bitfinex.

In a press release, Bitfinex said the equity consists of shares of Bitfinex’s owner, iFinex Inc. The exchange comes in the wake of a serious security breach against the company and its customers, in which Bitfinex discovered the theft of approximately 119,756 bitcoin valued at more than $70 million.

“Since the theft more than two months ago, our primary objective has been to make our customers whole,” said Philip Potter, chief strategy officer at Bitfinex, in the press release. “This is a significant step towards the recovery and stabilization of our company. We are very pleased with this highly favorable trend of conversions.” Daily trading and deposits on the Bitfinex exchange are also on the rise, yielding more volume and fees for the firm.

Following the theft on Aug. 2, 2016, management halted all trading, deposits and withdrawals on its platform, assessed the damage and finalized the accounting of losses. The company then generalized the losses across all accounts, according to what was expected to transpire in a liquidation context. In place of the losses, Bitfinex credited tokens labeled “BFXs” to customer accounts to record each customer’s dollarized loss. The tokens are contingent on the recovery of the stolen property and remain outstanding, pending redemption for $1 per token by the company or pending exchange for shares of the capital stock of iFinex. On Sept. 2 and 30, 2016, the company announced the unilateral redemption of 1.1812 percent and 1.3152 percent of outstanding BFX tokens, respectively. Redemptions were applied pro rata to all settled wallet balances.

The company also assisted in developing two opportunities for customers to exchange their BFX tokens for capital stock of iFinex. First, management collaborated with Simon Dixon and Bnk To The Future to create a special purpose vehicle that enabled qualified Bitfinex users to exchange their BFX tokens for beneficial interests in iFinex, at a value of $1 per BFX token. The company also worked with Monaco-based entrepreneur Alistair Milne to allow certain verified, non-U.S. Bitfinex users to convert BFX tokens to equity through a newly created BFX Trust. Since the creation of those two vehicles, a significant number of large Bitfinex token holders has elected to convert tokens into shares. Through the month of October, in excess of 20 million BFX tokens have been exchanged for shares of iFinex; all tokens exchanged for shares have been destroyed by Bitfinex. As of noon EDT on Oct. 10, 2016, a total of 48,205,714 BFX tokens were issued and outstanding.