The Bitfinex crypto exchange is making a new push to find and potentially recover more than $800 million in user funds seized by legal authorities in four different countries after its payment processor’s bank accounts were frozen. 

iFinex Inc., Bitfinex’s parent firm, applied for subpoenas in Colorado, Arizona and Georgia this month, asking federal courts to aid it in deposing banks that may have held funds for Crypto Capital, the payment processor on which Bitfinex stored customers’ and exchange funds. 

An entity hoping to confirm bank records can apply for a subpoena as banks cannot usually share those documents without a court order.

iFinex applied for a subpoena Tuesday to depose SunTrust Bank employees in Georgia. This follows a similar subpoena application to depose the Bank of Colorado earlier in April and ABT & Trust in Arizona. Bitfinex is looking for evidence to support its legal claims to about $880 million held in bank accounts in Poland, Lisbon, London and elsewhere that have been seized by authorities pursuing anti-money laundering criminal charges against Crypto Capital.

Bitfinex’s application follows an initial subpoena request from October 2019, filed in California, where the exchange sought testimony from a former TCA Bancorp executive about Crypto Capital’s accounts. This subpoena was later granted. A federal judge likewise granted iFinex’s application in Arizona, while a magistrate judge in Georgia asked the company to file a corporate disclosure statement first.

“Crypto Capital used a bank account with Citibank, N.A. (‘Citibank’) to accept certain deposits from Applicant’s customers. The account was held in the name of ‘Global Trading Solutions, LLC,’” the filing in Arizona stated.

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Bitfinex General Counsel Stuart Hoegner told CoinDesk the filings “are aimed squarely at obtaining further information” about the funds held by Crypto Capital.

“As we have said before, Bitfinex is the victim of a fraud and is asserting its rights to funds taken by Crypto Capital through legal measures initiated in various countries,” he said through a spokesperson.

Yearlong search

Bitfinex and its sister firm, stablecoin operator Tether, are the subject of civil lawsuits and an investigation by the New York Attorney General’s office alleging fraud and market manipulation.

Tether has denied the allegations in public statements. It has also aggressively issued more tether (USDT) since the investigation began; about $80 million in new USDT virtual currency on Thursday alone. This raises the presumed market value of the currency to about $8 billion, an increase of about $2 billion over the last 40 days, according to the Whale Alert tracking service.

“When you’re looking at big tether issuances like that, you should look at how other currencies are acting in the market,” said Bennett Tomlin, a bitcoin writer and researcher who has been following the case closely. “The other stablecoins don’t seem to have the same kind of inflows. And you will very rarely see tether redemptions. It almost always goes up. Because we know from their lawyers that it’s not fully backed, I’m generally skeptical of larger issuances of tether.”

Bitfinex began to rely on Crypto Capital as other banking relationships deteriorated, the firm said in the Georgia filing. Banks have grown wary of facilitating trade in cryptocurrency for fear of running afoul of cross-border money laundering laws.

However, the president of Crypto Capital, Ivan Manuel Molina Lee, was arrested by Polish authorities in October and charged with being a member of an international gang laundering up to 1.5 billion złoty or about $390 million “from illegal sources.” Authorities wrote that Molina Lee’s crimes included “laundering dirty money for Columbian drug cartels using a cryptocurrency exchange.” 

Federal prosecutors indicted a second principal of Crypto Capital, Oz Yosef, in October on charges of conspiracy to commit bank fraud, bank fraud and conspiracy to operate an unlicensed money transmitting business. Oz Yosef’s sister, Ravid, was also indicted on fraud charges connected to Crypto Capital but remains at large in Israel. 

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Crypto Capital managed to stash Bitfinex reserves in banks across the world, according to Bitfinex’s application. “Crypto Capital subsequently transferred funds between and among various banks, including in Europe and the United States. In the U.S. alone, Applicant has information that Crypto Capital used accounts held not only at SunTrust, but also Bank of America, Bank of Colorado, Citibank, Enterprise Bank & Trust, HSBC, Stearns Bank, Wells Fargo, TD Bank, and US Bank,” Bitfinex said in its subpoena application. 

Connecting the dots

Bitfinex hopes to trace how Crypto Capital moved money from one bank account to another to bolster its ownership claims over funds once held by the processor, according to the filings. Doing so requires navigating the convoluted chain of account ownership, commingled funds and financial transfers Crypto Capital used to manage money, Bitfinex notes in the application. 

Polish banks held about $335 million in Bitfinex fiat currency reserves, while Portuguese banks held about another $218 million, according to the Georgia filing.

Referring to statements made by Giancarlo Devasini, Bitfinex’s chief financial officer, the subpoena application said, “[F]rom approximately April to June 2018, Crypto Capital used a bank account ending in -9503 with Citibank to accept deposits from Applicant’s customers. The account was held in the name of Global Trading Solutions, LLC. Because the name of this LLC was similar to that of the entity that then owned Crypto Capital (Global Trade Solutions AG), Applicant believed the LLC to be an entity related to Crypto Capital.”

Global Trading Solutions LLC is owned by Reggie Fowler, a former National Football League investor tied to Crypto Capital. Fowler was indicted one year ago on charges of bank fraud and operating an unlicensed money transmitting business.

He rejected a plea deal earlier this year; a trial scheduled to begin Tuesday has been pushed to Jan. 11, 2021. A Department of Justice spokesperson said he did not know if the delay is related to the COVID-19 pandemic disrupting judicial schedules.

Citibank in California told Bitfinex’s legal team Fowler opened a separate, personal Citibank banking account at the same time and funded it with a $200,000 deposit from an unknown source and two subsequent wire transfers totaling $4 million. The wire transfers came from Banco BPI, one of three Portuguese banks Crypto Capital used for Bitfinex accounts.

While Crypto Capital was taking transfers from Bitfinex into one Citibank account, Fowler transferred $380,000 from his account to a SunTrust account, according to the subpoena application. 

See Also: Suit Alleging Tether and Bitfinex Manipulated Bitcoin Market Has Been Revised

Later, nearly $2 million of iFinex customer funds were transferred from the Citibank account to a Bank of Colorado account, Bitfinex said in the Colorado court filing.

Citibank told Bitfinex that this Bank of Colorado account “is held in the name of Eligibility Criterion, an entity owned or controlled by Fowler. Moreover, the wire transfer instructions indicated these transfers were ‘Intercompany Transfers.’” according to the document. 

New York courts have enjoined the firms from further depleting their cash reserves and from transferring any of those cash reserves to company executives, and directed the firms’ executives to produce documents and information central to the attorney general’s investigation. The companies are fighting those disclosures in court, an act that the Attorney General’s office described as “deeply perverse.”

Nikhilesh De contributed reporting.

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