I was reluctant to compare Bitfinex’s public relations moves to Scientology in my post on Friday about said PR — Scientology are a bit of a Godwin example — but in this morning’s news, we have “Bitfinex Hires Law Firm To Challenge Critics”:
The purpose of the suit is to harass and discourage rather than win. The law can be used very easily to harass, and enough harassment on somebody who is simply on the thin edge anyway, well knowing that he is not authorized, will generally be sufficient to cause professional decease. If possible, of course, ruin him utterly.
Bitfinex has hired the law firm of Steptoe & Johnson and is threatening legal action against a pseudonymous blogger who it says have made false claims about the bitcoin exchange. In a statement, Bitfinex said it hired Steptoe to respond to such claims with “appropriate action,” including “possible litigation” against “various parties.”
“To date, every claim made by these bad actors has been patently false and made simply to agitate the cryptocurrency ecosystem. As a result, Bitfinex has decided to assert all of its legal rights and remedies against this agitator and his associates.”
… In its statement, Bitfinex did not specify who exactly it might sue, on what grounds, or in which jurisdiction. “I think you can infer who,” said Ronn Torossian.
(Nobody seems to have put the entire statement up; if you have a copy, I’d be delighted to run it.)
It’s not clear how far Bitfinex thought this plan out beyond the initial threats. From their accent, “Bitfinexed” sounds American ; if they are, then a suit brought elsewhere would have to pass US free speech muster per the SPEECH Act.
If Bitfinex brought suit in the US, they would have the very high bar of demonstrating not merely error but actual malice in raising a matter of public concern — and “Bitfinexed” would in return get discovery of relevant information from Bitfinex, e.g., the sort of stuff that would be in a signed-off audit.
As Stephen Palley notes, “They’d have to come here for depositions, respond to RFPs, interrogatories, RFAs, rule 26 disclosures … and they have the burden of proof. And they can’t restrain future speech.”
If the plan is merely to discover “Bitfinexed”‘s identity — e.g., through subpoenas to Twitter, Medium or YouTube — so as to intimidate them into silence, this would rely on nobody coming to their assistance, not turning “Bitfinexed” into a cause célèbre and not directly inspiring many others to come forward in turn to take their place.
I have literally, personally, watched this one play out before. It really doesn’t end well for the aggressor.
(I honestly wonder sometimes if some people have ever heard of the Internet.)
“The plan is funds will be going to charity if nothing happens.”
I suspect the other point of this press announcement is to try to intimidate other media out of writing about the situation.
I don’t think so. It actually garners more media attention
— Amy Castor (@ahcastor) December 5, 2017
Apart from Nathaniel Popper’s New York Times article two weeks ago, Bloomberg ran a story today on the Tether situation: “There’s an $814 Million Mystery Near the Heart of the Biggest Bitcoin Exchange”. Not quite the sort of headline you want a proper, well-funded and difficult to intimidate news outlet to run:
Among the many mysteries at the heart of the cryptocurrency market are these: Does $814 million of a digital token known as tether really exist? And what is tether’s connection to Bitfinex, the world’s biggest bitcoin exchange?
(Ronn Torossian also tried to get Bloomberg to sign an NDA to find out who Bitfinex were banking with. Unsurprisingly, Bloomberg declined.)
The Bloomberg story includes Oguz Serdar’s attempts to actually cash out his one million Tether as dollars. Turkey banned PayPal, so he started paying his contractors in Bitcoin, then he shifted some of that into Tether to hedge against volatility.
He went to cash in USDT 1m for dollars, and Tether refused: “Due to ongoing banking difficulties we are only able to process requests for verified corporate customers.” Tether wouldn’t tell him who their bank was, and suggested he cash it out at an exchange. There is, of course, no exchange with any order book depth for Tether, so this is not possible.
Torossian thought it would be a good idea for the company’s image to defame Serdar to Bloomberg: “The customer in question was flagged as suspicious because of numerous irregularities.”
Serdar has responded on Twitter, including a screen shot of his verification as a customer:
I’d like shed some light on the Bloomberg’s Tether story.
Buying and selling Bitcoins from Turkey has been historically hard. When Paypal was banned in Turkey, I had to buy Bitcoins on-demand paying 7-10% premium plus credit card fees back in early 2016. My plan was to use it as medium of exchange for on-going vendor payments.
Even this day, in countries like Turkey (or Brazil) Bitcoin trades with high premiums with limited liquidity.
When I’ve first heard about Tether earlier this year, and I thought it actually looks very good if you constantly need to go in and out of fiat currencies (park gains) in cryptomarkets.
When you check their whitepaper, you get the idea of being able to easily withdraw & deposit fiat from their service. That’s initially why I signed up for them.
My account has been stuck in their verification process for months, but I finally decided trying to withdraw USD after hearing about @bitfinexed claims in recent weeks.
Even though USDT has been used by individual users very often, they told me that I can’t withdraw USD from them & I should look for other exchanges listed on their website. The dashboard of Tether was also unusable, lacking clear instructions for users.
At that time, Kraken was the only platform offering legitimate USDT-USD trading pair. Liquidity depth was close to non-existing there. You wouldn’t really want to cash out there: Allowing wash trading certainly doesn’t help to understand the liquidity depth. If I wanted to cash out as Tether support suggested, I’d need to dump 1 Tether for $0.3.
In today’s article the PR person of Bitfinex (@RTorossian5wpr) was lying about my verification status in Tether. I was a fully verified individual client of Tether service. (completed KYC & approved by their team)
Looking at the collective evidence I’ve seen about them (re: Bloomberg article) having a LONG position in cryptoassets, I’m genuinely afraid that Tether might have already become the biggest single point of failure decreasing legitimacy of entire crypto market capitalization.
This is not an attempt to spread FUD, but people once traded Liberty Reserve USD for BTC. If there’s a potential financial crime (1) on the table, adding blockchain sauce, using hyped decentralization words wouldn’t justify it.
I’d ping & ask @PreetBharara due to his experience of taking down Liberty Reserve, but he doesn’t work for US government anymore. That’s why I asked the legitimacy of Tethers on some of the government agencies listed in DoJ’s LR article from 2013: https://www.justice.gov/usao-sdny/pr/manhattan-us-attorney-announces-charges-against-liberty-reserve-one-world-s-largest
@MrChrisEllis, please feel free to answer. Why does Tether decide to attack me as a person for something I seem to have right for according to Tether whitepaper? Or was this all the legendary PR master (!) @RTorossian5wpr? Is this how you handle your customers?
— Oguz Serdar (@OguzSerdar) December 2, 2017
It’s worth noting, by the way, that, despite that white paper statement, no Tether has ever been destroyed. It’s not philosophically impossible that they have literally always had more buyers than sellers …
Really, though — what part of all this is easier than just releasing proper audits?
To reiterate the last line of Friday’s article: Let’s assume that every one of those 815 million Tethers is backed by a real dollar in a bank account, and the Tether and Bitfinex enterprises are entirely on the level. The succession of non-audits, the bizarre behaviour and the desperate, pathological public relations approach do not assuage doubts.
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