Bitfinex Hires Law Firm to Challenge Critics

Bitfinex has hired white-shoe law firm Steptoe & Johnson and said it may sue a pseudonymous blogger who has accused the bitcoin exchange of fraud.

Dec 4, 2017 at 10:30 p.m. UTC
Updated Sep 13, 2021 at 7:14 a.m. UTC

Bitfinex has hired the law firm of Steptoe & Johnson and is threatening legal action against a pseudonymous blogger who it says have made false claims about the bitcoin exchange.

In a statement, Bitfinex said it hired Steptoe to respond to such claims with "appropriate action," including "possible litigation" against "various parties." Jason Weinstein, who leads the blockchain practice at Steptoe, confirmed its hiring by Bitfinex in an email.

Stuart Hoegner, the in-house counsel for Bitfinex, said in the statement:

"To date, every claim made by these bad actors has been patently false and made simply to agitate the cryptocurrency ecosystem. As a result, Bitfinex has decided to assert all of its legal rights and remedies against this agitator and his associates."

The move aligns the world's largest bitcoin exchange – a company mired in controversy and shrouded in secrecy – with one of the most prominent law firms in the digital currency space.

Based in Washington, D.C., Steptoe is the counsel for the Blockchain Alliance, a public-private forum created two years ago to exchange information between the industry and law enforcement in the service of fighting crime.

Reached by email Monday, the blogger, who uses the handle Bitfinex'ed, said the exchange has "knowingly filed frivolous lawsuits in the past which they had no intent on completing," and cited as an example Bitfinex's lawsuit against Wells Fargo, which was withdrawn in April.

Litany of claims

Stepping back, Bitfinex, incorporated in the British Virgin Isles, has close ties to Tether, the Hong Kong-based issuer of a dollar-pegged cryptocurrency. While Tether says it fully backs its eponymous tokens, Bitfinex'ed has accused the company of issuing more tethers than it can redeem and using them to fund margin trading on Bitfinex, thereby artificially pumping up the price of bitcoin.

He or she has also claimed that Bitfinex allowed and benefited from wash trading (an illegal activity in which an investor simultaneously buys and sells an asset to create a misleading impression of market demand) on the exchange, and that it misled customers and investors on other matters.

Bitfinex'ed has made these and other claims in a series of often lengthy and highly detailed posts on Medium, Twitter and YouTube, which have been widely shared on cryptocurrency social-media circles.

In its statement, Bitfinex did not specify who exactly it might sue, on what grounds, or in which jurisdiction.

"I think you can infer who," said Ronn Torossian, the public relations specialist recently hired to represent Bitfinex and Tether.

Further, the Bitfinex statement goes on to suggest that those making the assertions might be engaging in "market manipulation" – broadly, the same thing Bitfinex'ed accused the company of.

"In recent months, certain parties and their associates have made false and unsubstantiated claims against Bitfinex, engaging in potential market manipulation activity that is dishonest and unlawful," Bitfinex said.

Correction: This report has been updated to reflect that Bitfinex withdrew its lawsuit against Wells Fargo in April, not August. 

Statue of Justice image via Shutterstock

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