Bitfinex has announced that many of its largest BFX token holders have agreed to exchange over 20 million BFX tokens for equity in the company, marking a step in its recovery following the August theft of approximately 119,756 bitcoins valued at more than $70 million. The equity consists of shares of Bitfinex’s owner, iFinex Inc.
“This is a significant step towards the recovery and stabilization of our company,” said Philip Potter, the company’s chief strategy officer. “
We are very pleased with this highly favorable trend of conversions. Since the theft more than two months ago, our primary objective has been to make our customers whole.”
Customers Assume Collected Loss
The company halted trading, deposits and withdrawals following the theft on August 2, 2016. The company then generalized the losses across all accounts based on what was expected to transpire in a liquidation context.
Bitfinex credited tokens labeled “BFXs” to customer accounts to record each customer’s dollarized loss. The BFX tokens are contingent on the recovery of the stolen property. They remain outstanding, pending redemption for $1 per token by the company or pending exchange for shares of iFinex stock.
On September 2 and 30, 2016, Bitfinex announced the redemption of 1.1812% and 1.3152% of outstanding BFX tokens, respectively. The company applied redemptions pro rata to all settled wallet balances.
The company also developed two opportunities for customers to exchange BFX tokens for iFinex stock.
Tokens Exchanged For Stock
Bitfinex worked with Bnk To The Future and Simon Dixon to create a special purpose vehicle to allow qualified Bitfinex users to exchange their tokens for interests in iFinex, at a value of $1 USD per token.
The company also worked with Alistair Milne, a Monaco-based entrepreneur, to enable certain verified, non-U.S. Bitfinex users to convert tokens to equity through a new BFX Trust.
A number of large token holders have elected to convert tokens into shares. Through October, more than 20 million BFX tokens have been exchanged for iFinex shares. All exchanged tokens have been destroyed. As of noon EDT on October 10, 2016, 48,205,714 BFX tokens were issued and outstanding.
Special Recovery Tokens
Bitfinex also created a tradeable Recovery Right Token (RRT) to compensate victims. Should any stolen bitcoins be recovered, the recovered amounts will first be used to repay then-outstanding or unconverted BFX tokens. Any excess recovered amounts after all outstanding BFX tokens have been redeemed at full face value will be distributed to RRT holders.
The company has established a subscription schedule that rewards those who committed to conversion early. Subscriptions received on or before October 7, 2016, were given one RRT for each BFX token converted into iFinex shares. Those that subscribed on or after October 8, 2016, but before November 1, 2016, are entitled to half an RRT for each BFX token converted into shares.
Subscriptions received after October 31, 2016, up to and including November 30, 2016, will receive a quarter of an RRT per BFX token converted to shares. No further RTTs will be given after November 30, 2016.
“It is our intention to continue to build customer confidence, enhance our new security protocols, and make Bitfinex a strong investment option for our shareholder partners,” Potter said. “We are thrilled to welcome our new shareholders to the Bitfinex community of interest.”
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