Bitfinex Cryptocurrency Exchange plans to raise $ 1 billion during the initial stock exchange placement (IEO) of its token, according to white paper, which The Block has read. The final version of the document can still be changed, but analysts have already warned that the planned campaign may adversely affect the price of Bitcoin.
According to one of the passages of the document published by Zhao Dong, the investor of the exchange, the Bitfinex token will be released under the ticker LEO and initially offered to a limited group of investors. Dong also confirmed previous reports that Bitfinex received verbal confirmation of investors about their intention to acquire tokens for $ 600 million, however, if the coins are not fully distributed by May 10, the campaign will turn into a public plane.
White paper also states that the token is being issued to cover $ 850 million, which were frozen in the accounts of the payment company Crypto Capital and because of what Bitfinex started having problems with the prosecutor’s office in New York . At the same time, the exchange declares that it “actively cooperates with the investigation and uses procedural norms to defrost these funds” and expresses confidence that they will be able to return them.
LEO tokens are supposed to be bought by the exchange at market prices on a monthly basis. For these purposes, Bitfinex intends to allocate at least 27% of its profits, but it also reserves the right to buy out the tokens within 18 months after the funds are unfrozen.
Zhao Dong additionally told about Plan B: if it is not possible to return the frozen assets, the exchange will use its operating profits to pay off the tokens. Based on the performance over the past two years, Bitfinex expects to redeem them within four years.
Also, to repay tokens bitcoins can be used, which the exchange lost as a result of a hacker attack in August 2016. This will happen if a part of almost 120,000 BTC can be returned.
The LEO token itself will allow Bitfinex users to receive discounts on commissions for trading transactions in cryptocurrency-cryptocurrency pairs, and also give them more favorable credit and withdrawal terms.
Despite the fact that Bitfinex’s plans at first glance are not directly related to the wider market, the head of the research department of Fundstrat, Tom Lee, believes that they may adversely affect the price of bitcoin.
$ 1 IEO is a Billion lot of "new" token supply and Probably has a short-TERM negative impact on $ The BTC #bitcoin and the crypto OTHER Needs as with the the market to absorb the this supply …
… Unless all the purchasers of the IEO come in, they make less sense. https://t.co/no9LlN0yJQ
– Thomas Lee (@fundstrat) May 4, 2019
“IEO for $ 1 billion is a large amount of“ new ”emission of tokens, and in the short term, it is likely to have a negative impact on Bitcoin and other cryptocurrencies. The market needs to absorb this volume … Unless IEO buyers will be new individuals in cryptocurrencies, but this is unlikely, ” he wrote.
Lee also added that miners sell bitcoins for $ 7 million daily, and IEO for $ 1 billion is actually 142 days of their activity, concentrated in one day.
As BlockchainJournal wrote, the New York State Attorney General’s Office appealed to the State Supreme Court to reject the Bitfinex lawyers ’request for the annulment of a previous court order. The ministry stressed that the operator of the trading platform did not provide the authorities with documents confirming its financial stability and revealing the essence of the liquidity problems.
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