As the global regulatory atmosphere around cryptocurrency firms tightens, iFinex Inc., the Hong Kong-based proprietor of crypto exchange Bitfinex, steps towards consolidating more control over its operations.
According to a report by Bloomberg, IFinex has proposed a $150 million share buyback to acquire about 9% of the company’s outstanding capital. The particulars of this offer were dispatched to shareholders on September 22, indicating a price of $10 per share for a total of 15 million shares, a move valuing the firm at $1.7 billion.
The genesis of this proposal can be traced back to a positive performance by the company in recent years. Moreover, this buyback offer is not solely a reflection of the firm’s upward trajectory but an avenue to ease the escalating demands on investors. These demands primarily encompass providing information to bolster Bitfinex Group’s regulatory applications and navigating the scrutiny tethered to it. Hence, this initiative also offers a pathway for investors to exit what has been described as a relatively illiquid investment.
The backdrop of Tether and Bitfinex’s regulatory challenges
The entanglement of iFinex with Tether Holdings Ltd., the issuer of crypto’s most traded token, USDT, adds complexity to this narrative. In 2021, US-based regulators imposed a total fine of $42.5 million on Tether and Bitfinex under allegations of Tether misrepresenting the reserves backing its USDT stablecoin and Bitfinex servicing US customers without proper approval. The circulation of Tether’s USDT has seen a significant uptick this year, despite the other stablecoins losing market share.
The proposed buyback is also an emblem of iFinex’s effort to distance itself from past adversities. Back in 2016, Bitfinex fell victim to a hack, leading to a loss of around $71 million in Bitcoin. To amend this, Bitfinex offered BFX tokens to the affected users, which were later redeemed for shares in iFinex through the investment platform BnkToTheFuture. This share buyback offer has been extended to those shareholders who acquired iFinex stock as part of this 2016 swap arrangement.
The share buyback proposal is not just a business strategy from IFinex but also reflects the evolving dynamics in the crypto industry amid regulatory ambiguities. With the buyback, iFinex aims to reinforce its control and alleviate the regulatory pressure on its investors.
The deadline for shareholders to signify their intent to sell their holdings to iFinex has been set for October 24, marking a crucial date in iFinex’s quest for greater operational autonomy amid a challenging regulatory milieu.
Last month, Bitfinex revealed that it holds Bitcoin as a long-term investment, although the exchange did not disclose specific figures. Paolo Ardoino, the CTO of Bitfinex, advocated for cryptocurrency exchanges to reinvest their profits into Bitcoin, exemplifying Bitfinex’s dedication. Tether intends to allocate up to 15% of its profits to Bitcoin, which includes shifting its reserves away from U.S. government debt.
