Crypto Exchanges Hotbit and Bitfinex Face Regulatory Headwinds
China-based crypto exchange Hotbit has suspended withdrawals after its assets were frozen due to an ongoing investigation. Meanwhile, Tether‘s sister company Bitfinex is ostensibly facing legal investigation in the US.
Hotbit announced Wednesday that it has suspended trading, deposit, withdrawal, and funding functions due to an ongoing investigation into a former employee.
“A former Hotbit management employee who left Hotbit in April this year was involved in a project last year (which was against Hotbit’s internal principles and of which Hotbit was unknown) that law enforcement authorities now think is suspected of violating criminal laws,” the exchange explained.
The exchange said that a number of its senior managers have been subpoenaed by law enforcement, without identifying the jurisdiction. It added that “law enforcement has frozen some funds of Hotbit, which has prevented Hotbit from running normally.”
According to its website, Hotbit is registered in Hong Kong and Estonia, with most of its staff hailing from China, Taiwan, and the US.
In another update, the exchange said all users’ unfilled open orders will be canceled in order to prevent losses. It will also liquidate all users’ leveraged exchange-traded fund (ETF) positions and will publish a compensation plan for users once it resumes operations.
Meanwhile, Bitfinex, a cryptocurrency exchange owned and operated by iFinex, which also owns USDT issuer Tether, is apparently facing a criminal investigation in the US, according to a Department of Justice (DOJ) reply to a Freedom of Information Act (FOIA) request.
The request, which asked for information pertaining to Tether Holdings Limited, its parent company iFinex Inc. and its subsidiaries, was denied by the DOJ on the basis that “production of such law enforcement records or information … could reasonably be expected to interfere with enforcement proceedings.”
“Looks like Bitfinex is in legal proceedings in the US – the DOJ denied my FOIA request,” said Twitter user oleh86, who claims to have filed the FOIA request.
“Bitfinex routinely has an open dialogue with law enforcement agencies, including the US Department of Justice, as part of our commitment to co-operation, transparency, and accountability,” a spokesperson for Bitfinex told Cryptonews.com, without specifying.
Looks like #Bitfinex is in legal proceedings in the US – the DOJ denied my FOIA request on grounds of Section b(7)(A) aimed at preventing pretrial publicity that could impair a court proceeding@Bitfinexed @Frances_Coppola @realPaulSantos @CasPiancey @BennettTomlin @vhranger pic.twitter.com/NMZJuXZypq— oleh86 (@oleh86) August 10, 2022
Bitfinex and Tether have faced several investigations from criminal and civil entities. In late 2021, the US Commodity Futures Trading Commission (CFTC) ordered the two to pay fines totaling USD 42.5m.
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(Updated at 17:13 UTC with a comment from Bitfinex.)