Bitfinex Sues Wells Fargo Over Bank Transfer Freeze

Digital currency exchange Bitfinex has filed suit against Wells Fargo after the banking giant restricted its ability to send funds worldwide.

AccessTimeIconApr 11, 2017 at 12:00 p.m. UTC
Updated Sep 11, 2021 at 1:13 p.m. UTC

Digital currency exchange Bitfinex filed suit against banking giant Wells Fargo late last week, after the bank moved to limit its ability to send funds worldwide.

Specifically, the suit – filed in a federal court in San Francisco, where the bank is headquartered – alleges that the bank has prohibited four Taiwan-based banks that do business with Bitfinex from completing outbound wire transfers. The banks in question, according to the filed complaint, are KGI Bank, First Commercial Bank, Hwatai Commercial Bank and Taishin Bank.

Named as plaintiffs in the case are Taiwan-based iFinex, Inc, along with two British Virgin Islands subsidiaries and digital asset transfer firm Tether.

In addition to seeking an injunction against Wells Fargo in order to prevent the wire transfer stoppage, the exchange is seeking more than $75,000 in damages.

The news is a major development for an exchange that has seen no shortage of significant events in the past year. Last summer, Bitfinex was robbed of tens of millions of dollars worth of bitcoin. In the aftermath, it issued a novel digital asset aimed at reimbursing affected users – the last of which were redeemed at the end of last week.

Allaying concerns

As might be expected, news of the suit and the blocked transfers has sparked fears of locked funds and the specter of an exchange collapse. A representative for Bitfinex took to social media soon after word of the suit emerged, declaring that "to be clear, this isn’t a regulatory action" and that no funds have been frozen.

They went on to say:

"The decision to initiate legal action is because we cannot allow precedents in this industry where clearing houses can disrupt businesses that are by all metrics complying with the rules in place. If we allow them to simply flip a switch and disrupt business, then there becomes a precedent in the bitcoin industry beyond just Bitfinex, so we believe it is the appropriate time to take action."

So, what brought on the wire transfer freeze? Public records detailing correspondence between Bitfinex’s legal representatives and Wells Fargo reveal few details, apart from a seeming unwillingness to engage on the part of the San Francisco-based bank.

For now, Wells Fargo is staying quiet on the case, declining comment when contacted by CoinDesk.

Battle to come

show that, as of Sunday, a summons had been issued in the case, with an initial hearing scheduled for 10am PST on 25th April. That hearing will focus specifically on the motion for a preliminary injunction sought by Bitfinex.

Yet, at least one outside observer expects the exchange to run into at least some legal hurdles as it takes Wells Fargo to court.

Stephen D Palley, a Washington, DC-based lawyer, suggested that Wells Fargo may challenge the jurisdictional nature of the suit, given that the plaintiffs are based outside of the US.

Should it get past that potential problem, other pitfalls could trip up the effort as well, according to Palley.

"Even if Bitfinex gets past a jurisdictional motion, it has no privity of contract with Wells Fargo. As a consequence, it pleaded a cause of action for 'Intentional Interference with Contractual Relations.' I know nothing about the underlying facts, but strictly as a legal proposition, this is a hard theory to prove," he told CoinDesk.

Palley concluded:

"I can’t imagine that [Wells Fargo] really wants to intentionally interrupt Bitfinex’s business. It seems more likely that compliance red flags were raised."

A full copy of the original complaint can be found below:

1-main by CoinDesk on Scribd

Justice image via Shutterstock


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