Bitfinex is having a $1 billion IEO, according to an excerpt of the Bitfinex IEO white paper posted by the company’s shareholder Zhao Dong
The exchange tokens are issued to provide liquidity to the company, as $850 million of its funds are currently frozen by the authorities in Poland, the U.S. and Portugal
The IEO allocations are currently available to private investors, and will be open to the public after May 10
by Celia Wan
3 hrs ago · 2 min read
Bitfinex will issue an initial exchange offering (IEO) that aims to raise $1 billion, according to an excerpt of the Bitfinex IEO white paper posted by the company’s shareholder Zhao Dong. The final version of the white paper is still subject to change.
Bitfinex’s exchange tokens, named LEO, will be first offered to private investors, then subsequently opened to the public after May 10 if there is any allocation left, according to the white paper. According to Zhao Dong, Bitfinex already raised $600 million in private but only verbal commitments.
The white paper notes that one of the major reasons for issuing the exchange tokens at this particular time is because the company’s $850 million funds are currently frozen in several accounts controlled by the payment processing company Crypto Capital. A week ago, the New York Attorney General (NYAG) sued Bitfinex and Tether for commingling funds to cover a loss of $850 million.
However, Bitfinex states in the white paper that it is “actively collaborating with the legal investigation and applying to unfreeze these funds through legal procedures.” And the company is “confident that it will retrieve these funds,” according to the white paper.
The exchange tokens will be bought back on a monthly basis at the market price, with at least 27% of Bifinex’s profit from the previous month. Notably, Bitfinex also reserves the right to buy back the tokens within 18 months after its funds get unfrozen. In fact, the white paper states that at least 95% of the unfrozen funds will be used to redeem and burn the LEO in equivalent amount. Zhao Dong said that even if the seized money cannot be retrieved back, according to the projections from Bitfinex’s profits in 2017 and 2018, the company should be able to buy back all the tokens within 4 years.
In addition, Bitfinex also notes that another reason for issuing IEO is due to Bitfinex’s loss of 119,756 bitcoins (~$72 million at the time) in hack in August 2016. Therefore, the retrieval of stolen bitcoins can also trigger said redemption process. If some bitcoins are retrieved, at least 80% will be used to buy back LEO. However, by February 2019, Bitfinex was only able to retrieve 28 bitcoins. The hope of getting back a significant amount seems dim.
Like other exchange tokens, such as Binance’s BNB, LEO will also offer discounts on trading fees. According to the white paper, LEO holders will have access to a 15% discount of taker fees for crypto-to-crypto trading, discounted lending rate, and discounted withdrawal fees.
Bitfinex’s profit in 2018 was $404 million and paid out a dividend of around $261 million, according to the white paper.