Lawsuit Archives

Banking problems hound Bitcoin exchanges, force few more exchanges to ban withdrawals

Posted on April 21, 2017 | by [email protected]

Bitcoin exchanges have been plagued by the problem of Commercial banks sometimes denying transfers affecting their functioning. Most of the times, the banks back up their actions by citing that with Bitcoin’s stature still being unregulated, they don’t want to get involved in anything that might turn out to be illegal. Most of the Bitcoin exchanges have great KYC and AML frameworks that allow them to put in the guardrails that prevent their customers from engaging in illicit activities. The question is are the banks really fearing regulation to put an end to transactions related to Bitcoin? Or is just an excuse to hamper the growth of the cryptocurrency that might outplay the banks. Whatever the case might be, the issue has escalated and is taking a toll on traditional Bitcoin exchanges. Let’s delve deeper into the dynamics of the problem and its effects:

Bitfinex’s lawsuit and the implications:

Bitfinex initially took Wells Fargo to the court for having reversed US Dollar cash deposits designated to their customer accounts coming from the exchange. The legal basis for the lawsuit lies in the fact that Bitfinex works with Taiwanese banks, including a bank called ‘Taishin’. Tashin is responsible for relaying the transfers to US customers using Wells Fargo, among others. Wells Fargo recently sent a letter to the Taiwanese bank informing them that they would no longer be accepting the deposits from these accounts until “further due diligence” was obtained.

However a week later Bitfinex withdrew the lawsuit as experts believed there was not enough legal standing for the case. However, they followed up with an announcement which announced that they would be banning withdrawals indefinitely.

Other Exchanges report the same issue:

A couple of days later major Bitcoin exchanges like BTCe and Okcoin reported the same issue. The bitcoin exchange Btc-e has announced on Twitter that it is not accepting U.S. dollar wire transfers until the end of the month. This has been attributed to a bank account problem. Following this Okcoin has also suspended US dollar deposits have been suspended because of issues with intermediary banks. The exchange has also gone on to warn the customers against making any deposits as they might be rejected. The announcement cited that the deposits will resume as the exchange find alternatives for the complication.

Third party banks de-risking or putting up a fight with Bitcoin?

Intermediary banks like Wells Fargo are known as third party banks that are responsible for these transfers. They support international transactions and transaction settlements. Since Bitcoin businesses don’t have a defined regulation, what these major banks are doing can put them in a position of risk. Hence what they are doing can be defined as ‘de-risking’ to avoid any possible legal issues. However, this might also turn out to be a move to hamper Bitcoin’s growth and its growing reputation. How exchanges will circumvent the challenges to operating smoothly again is to be seen.

Wells Fargo and Bitfinex war escalates, Bitfinex shuts down fiat deposits

Posted on April 17, 2017 | by [email protected]

Cryptocurrencies are undoubtedly the future of transactions and Bitcoin is leading the way. With increasing number of Bitcoin and cryptocurrency transactions, the commercial banks are fearing a near replacement. Added to their concerns, they are unsure about how the Bitcoin regulations would shape up in different geographies and are hesitant in aiding their development. Bitfinex that has recently redeemed the hack victims completely has been a victim of one such incident. This time the involved bank was Wells Fargo and the exchange moved on to a lawsuit to avoid any impending repercussions. Let’s dive deep into what exactly happened and how Bitfinex is proposing to tackle the issue:

Lawsuit over embargoed wire transfer:

Bitfinex is taking Wells Fargo to the court for having reversed US Dollar cash deposits designated to their customer accounts coming from the exchange. This is infact a very important law suit for the Bitcoin world as the legality of shutting down bank accounts merely for being related to the use of Bitcoin or cryptocurrency trading has been a grey area. The opening statement makes it clear enough for the court what the issue is:

“Wells Fargo has suspended U. S. dollar wire transfer operations needed to remit to plaintffs’ customers U. S. dollars that the customers deposited with plaintiffs to purchase digital currency, causing imminent and irreparable harm to plaintiffs.”

The legal basis for the lawsuit lies in the fact that Bitfinex works with Taiwanese banks, including a bank called ‘Taishin’. Tashin is responsible for relaying the transfers to US customers using Wells Fargo, among others. Wells Fargo recently sent a letter to the Taiwanese bank informing them that they would no longer be accepting the deposits from these accounts until “further due diligence” was obtained.

Withdrawal of Lawsuit:

Surprisingly, a week after filing, Bitfinex has withdrawn its lawsuit against Wells Fargo for suspending its U.S. dollar transfers. Many believed that Bitfinex had a chance against Wells Fargo, which acted as the company’s correspondent bank. The lawsuit became the cynosure of the cryptocurrency world as that would let everyone know about Bitcoin’s standing. While no statement was issued by Bitfinex, many believe that Bitfinex had no legal standing and banks are allowed to selectively block transactions at their own discretion. Hence Bitfinex would have eventually lost and it was an act to make a statement.

Bitfinex stops accepting Fiat deposits:

After the entire showdown about the lawsuit against Wells Fargo, Bitfinex has announced yesterday that they would stop accepting fiat deposits. The exchange has sighted that the refusal on the part of the banks is one of the major reasons. They said:

“Beginning April 18, 2017, all incoming wires to Bitfinex will be blocked and refused by our Taiwan banks. This applies to all fiat currencies at the present time. Accordingly, we ask customers to avoid sending incoming wires to us until further notice, effective immediately.”

The exchange said this would be an expected delay till they find alternatives to process customer funds and put a framework in place.

Coinbase steps up the game, launches margin trading

Posted on March 21, 2017 | by [email protected]

The versatile Bitcoin exchange and wallet services provider, Coinbase has been in the limelight consistently from August last year after IRS issued summons to reveal the details of its customer base. While the firm is fighting off the summons, it has put in good efforts to re-affirms the customers’ confidence in the company. The successive campaigns have become successful as the company recently hit the landmark of 6 million customers. In an attempt to woo and capture institutional investors, the wallet company cum exchange has introduced Margin feature. Let’s dive deep into how Coinbase has progressed after the law suit and what they have in store for the ever changing Bitcoin ecosystem:

Coinbase-IRS Lawsuit:

After a recent investigation, IRS has revealed that only a small number of people are declaring their bitcoin profits or losses in their yearly tax returns. The investigation followed after Coinbase decided to fight the summons issued by IRS through lawsuit in attempt to conserve the privacy of its customers. The first ever Bitcoin company with a Billion dollar valuation provides its services primarily in US and in other parts of the world and is committed to protect the identity of the customers. Coinbase said:

We will continue to work with the IRS to assess the government’s willingness to fundamentally reconsider the focus and scope of the summons. If it does not, we anticipate filing opposition papers in court in coming months.

Coinbase doesn’t support listing Bitcoin Unlimited:

Recently a group of 20 exchanges signed a statement that they would be listing ‘Bitcoin Unlimited’ as another cryptocurrency in case of a hard fork. However, Coinbase’s CEO Brian Armstrong publicly agreed that he didn’t support the statement. He believes that listing any currency as BTC regardless of longest chain and presumably other factors of price and transactions is not healthy for Bitcoin development. The hard fork seems inevitable with Bitcoin Unlimited having 40% network share which might occasionally hit 50% owing to the network variance.

Launch of Margin Trading Feature:

Coinbase’s GDAX digital asset exchange has included margin trading feature in an attempt to capture the market that comprises of institutional investors. From March 20th, eligible customers can trade with up to three times leverage in markets for Bitcoin, Ethereum and Litecoin. The increasing interest of institutional investors in cryptocurrencies has prompted the exchange to introduce the feature. However the feature is only available for selected investors/traders. With this launch, GDAX becomes the second US-based exchange to offered leveraged trading services for cryptocurrencies after Kraken.