Bitfinex Announces Sizable Token-for-Equity Exchange by Customers
We are announcing today that many of our largest BFX token holders have agreed to exchange more than 20 million BFX tokens for equity in Bitfinex. The equity consists of shares of Bitfinex’s owner, iFinex Inc.
“Since the theft two months ago, our primary objective has been to make our customers whole,” said Philip Potter, Chief Strategy Officer at Bitfinex. “This is a significant step towards the recovery and stabilization of our company. We are very pleased with the results of this first round of conversions.”
On August 2, 2016, we discovered the theft of approximately 119,756 bitcoins from Bitfinex valued at more than $70 million. We immediately halted all trading, deposits, and withdrawals on its platform. We assessed the damage resulting from the assault. We finalized the accounting of the losses and generalized them across all accounts according to what was expected to transpire in a liquidation context. In place of the losses, we 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 us or pending exchange for shares of the capital stock of iFinex.
On September 2 and 30, we announced the unilateral redemption of 1.1812% and 1.3152% of outstanding BFX tokens, respectively. Redemptions were applied pro rata to all settled wallet balances.
We have also assisted in developing two opportunities for customers to exchange their BFX tokens for capital stock of iFinex. First, we collaborated with Simon Dixon and Bnk To The Future to create a Special Purpose Vehicle (SPV) that enabled qualified Bitfinex users to exchange their BFX tokens for beneficial interests in iFinex, at a value of $1 USD per BFX token. We also worked with Monaco-based investor and 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 the Bnk To The Future and BFX Trust vehicles, a significant number of large Bitfinex token holders has elected to convert tokens into shares. More than 20 million BFX tokens have been thus exchanged for shares of iFinex; all tokens exchanged for shares have been destroyed by us.
As of 12 o’clock noon EDT on October 10, 2016, a total of 48,205,714 BFX tokens remains issued and outstanding.
As a further reward for BFX token holders converting to equity, we created a tradable Recovery Right Token (RRT) to compensate victims of the security breach. In the event of any recovery of the bitcoins stolen from Bitfinex, the first priority will be to use any recovery amounts to repay the then-outstanding or unconverted BFX tokens. If there are any excess recovered amounts after all outstanding BFX tokens have been redeemed at full face value, the recovered funds will be distributed to RRT holders.
Management has laid out a subscription schedule that rewards those subscribing early. Subscriptions received on or before October 7 were provided with one RRT for each BFX token converted into shares of iFinex. Those subscribing on or after October 8 but before November 1 will be entitled to one-half an RRT for each BFX token converted into shares. Subscriptions received after October 31 up to and including November 30 will receive one-quarter of an RRT per BFX token converted to shares. After November 30, no RRTs will be offered to subscribers.
“We are thrilled to welcome our new shareholders to the Bitfinex community of interest. The company continues to press forward on all fronts to expeditiously retire BFX tokens through the equity conversion with qualified token holders, raising new capital through equity financing, operating profits, and prudent reductions in contingent liability reserves,” Potter said. “It is our intention to continue to build customer confidence, enhance our new security protocols, and make Bitfinex a strong investment option for our shareholder-partners.”
To speak with Bitfinex Chief Strategy Officer Philip Potter, contact David Lyons of EcoStrats at 954-612-7225, or at DL@ecostrats.com.