Bitcoin Traders Worried as Bitfinex Wire Transfers ‘Frozen’ by Wells Fargo
Bitcoin exchange Bitfinex has taken legal action against correspondent bank Wells Fargo, after it delayed outbound wire transfer withdrawals from the exchange. The delay created a situation where traders feared Bitfinex’s funds had been frozen.
Public court documents show that iFinex inc, parent company to the major cryptocurrency exchange, has filed a restraining order to take legal action against Wells Fargo in response to difficulty involving their customers’ outbound wire transfers coming out of the bank.
“The Temporary Restraining Order. . .[is] intended to immediately re-institute SWIFT wire withdrawals from Bitfinex to our customers’ local banks that clear via Wells Fargo,” Bitfinex community services representative Brandon Carps told Bitsonline.
“We were not notified by Wells Fargo that this was approaching or whether they were considering any policy changes.”
Legal Documents Surface, Bitfinex Responds
The issue came to the public’s attention on Friday when a Redditor posted a link to the legal documents, causing customers and others in the Bitcoin community to believe Wells Fargo had frozen $180 million USD worth of Bitfinex’s funds.
Carps took to Reddit and quickly responded to these concerns, clarifying the funds were not frozen and that it was not a result of regulatory action. According to Carps, inbound wires “are moving” — it’s only outbound transfers being delayed due to Wells Fargo.
Carps assured everyone they would also take action regarding the matter, informing users that the company had filed a temporary restraining order against the bank. He went on to say that Bitfinex had taken this action, in part, as a principled stand against something they see as a common business practice among clearinghouses:
“We’re not going to roll over for action like this. It’s precisely why we have increased our legal department. The decision to initiate legal action is because we cannot allow precedence in this industry where clearing houses can disrupt businesses that are by all metrics complying with the rules in place.”
Bitfinex: ‘Bitcoin Threatens Their Business Model’
While Carps told Bitsonline and repeatedly noted publicly that Wells Fargo gave no reason for delaying outbound transfers, it eventually became apparent that the bank has an explicit policy in place to not support transfers with cryptocurrency businesses.
Bitfinex wasn’t surprised by this revelation, with Carps posting on Reddit that Bitcoin threatens the entire banking industry:
“This isn’t a new development by any stretch of the imagination. Bitcoin is a direct threat to their model. There are a few intermediaries that share that policy. In these instances, we inform the user about these intermediaries and explain steps necessary to successfully wire in.”
Carps further noted that, while Bitfinex has initiated court proceedings, the process has paused due to the weekend. However, Carps said he would update the public on the proceedings as progress resumes.
Seeking Damages, Bitfinex Troubles Continue
Along with the temporary restraining order, Bitifinex is also seeking damages from Wells Fargo for disrupting their ability to meet the contractual obligations they have to their customers.
According to the court documents, Bitfinex’s parent company filed the lawsuit on April 5th, 2017 for the “intentional interference with contractual relations and injunction relief arising from Wells Fargo’s interference with plaintiffs’ customer contracts.”
Can’t Catch a Break
The discovery of the wire transfer issue sent a tinge of fear through the community, bringing up memories of past difficulties faced by Bitfinex that threatened user funds.
Before their issues with Wells Fargo, they had to handle the fallout from their now infamous 2015 “flash crash,” when Bitfinex servers went offline and caused Bitcoin’s price to fall 14 percent in just 30 minutes.
Then, less than a year later, Bitfinex suffered a hack resulting in a loss of customer funds totaling $65 million USD. Thus, considering previous difficulties, the issue with Wells Fargo has just added insult to injury.
Bitfinex can’t seem to catch a break, as a series of unfortunate events continues to plague their business operations. But who knows? Maybe this time the exchange’s troubles will have a happy ending.
What do you think of Wells Fargo blocking transfers related to cryptocurrencies? What do you think of the restraining order? Let us know in the comments below.
Images via Wells Fargo, Bitfinex
Evan Faggart contributed reporting and writing to this article.