Bitfinex is planning to raise $1 billion via an IEO (initial exchange offering).
IEOs have a similar nature to ICOs except for the fact that they are vetted by and launched on exchanges, as the Daily Hodl reports.
The official whitepaper for the Bitfinex IEO shows that the crypto exchange plans to raise $1 billion worth of tether (USDT) by selling one billion of its own exchange token, LEO.
The tokens are on sale until today, May 11.
Bitfinex, accused of fraud
The utility token is designed to be used for various activities on Bitfinex, and the funds from the sale are supposed to mitigate Bitfinex’s losses due to its dealing with a third party company.
This acted on behalf of the exchange to hold $850 million in customer and corporate funds as the online publication mentioned above reported.
The funds are missing and now Bitfinex has been accused of fraud by the New York Attorney General’s office.
Bitfinex says it if does not meet its goal of selling one billion tokens in the private offering, it will continue to pursue other avenues to sell the tokens.
“If fewer than 1 billion USDT tokens are sold by private token sale, the Issuer may thereafter sell remaining tokens at times, and in a manner it deems appropriate in its sole discretion, consistent with applicable law.”
Bitfinex turned to cash reserves backed by USDT
The AG says that then the exchange turned to cash reserves that are backing the stablecoin Tether.
The AG alleges that Bitfinex used Tether’s cash reserves to pay customers who have been requesting to withdraw fiat currencies from the exchange.
“Our investigation has determined that the operators of the ‘Bitfinex’ trading platform, who also control the ‘Tether’ virtual currency, have engaged in a cover-up to hide the apparent loss of $850 million of co-mingled client and corporate funds.”