Hundreds of thousands of dollars’ worth of stolen EOS tokens are being held hostage by cryptocurrency exchange Bitfinex, which has a reputation for compromising wallets and general lack of security. On top of that, Bitfinex is also notorious for supporting unbacked stablecoins. Considering the aforementioned, it is no surprise that Bitfinex is always in the middle of a lawsuit.
The theft of some 158,000 EOS tokens, worth about $670,000 at the time, was reported to iFinex Inc., BFXNA Inc. and BFXWW Inc. late last month by doctor Ephraim Atwal in federal court in New York. In total, nearly 2.1 million EOS tokens were stolen from Atwal’s account between late-February and early-March 2019.
Atwal’s attorneys accuse iFinex of unlawful conversion, trespass to chattels, breach of contract, unjust enrichment, negligence, as well as engaging in deceptive acts and practices in violation of New York General Business Law (GBL). Atwal seeks damages on five of the claims, as well as treble damages and reasonable attorneys’ fees for the GBL violation, among other relief the Court deems appropriate.
Atwal vs Bitfinex Lawsuit Results in ECAF & FBI Intervention
Atwal filed a claim with the EOS Core Arbitration Forum (ECAF) seeking an emergency freeze of his account on September 25, 2018. While Atwal’s ECAF claim was pending, an ECAF arbitrator ordered the EOS blockchain to restrict any transfers from the compromised account. After changing the private keys, an unauthorized party moved 158,000 EOS tokens from the Bitfinex account to “one or more accounts”.
A ECAF ruling published on March 25, 2019, declared Atwal to be the “true owner” of the account and stated that transfers from the account were “unauthorized.” Online exchanges were urged to treat the ruling as proof of ownership and return any originating funds.
In accordance with Bitfinex’s instructions, Atwal requested the freezing of his stolen EOS on February 22, 2019. Atwal claims that iFinex did not disclose how long the initial freeze would last, but he still got the FBI to instruct Bitfinex to freeze the EOS and return it to him.
iFinex’s support of unbacked stablecoins & Billion Dollar Bitcoin scam
IFinex –which holds the controversial but unbacked Tether stablecoin — treats regulatory orders much as Vladimir Putin treats United Nations resolutions, i.e., as something that can be ignored without too much repercussion.
iFinex is currently trying to obtain the 94,000 BTC tokens seized last month by the United States Justice Department. The massive haul of BTC, worth several billion dollars, was part of nearly 120,000 BTC stolen from the troubled Bitfinex during the 2016 hack. In New York, Homeland Security Investigations assisted with the investigation that led to the February mega-seizure. Atwal’s New York residency could help tilt the balance in his favor.
Brock Pierce Founder Tether and EOS face lawsuits for non-compliance and scams
Atwal’s troubles may have begun after falling victim to a phishing attack, however, one could argue that they started when he invested in EOS, a technology co-founded by Brock Pierce, who also co-founded Tether. It appears to be very difficult for anyone to profit from involvement in the Crypto Crime Cartel’s Kevin Bacon, regardless of six degrees of separation.
EOS developer Block.one, founded by Pierce, has come under fire for its 12-month initial coin offering (ICO). The token’s ICO resulted in a $24m penalty issued by the SEC for running an unregistered securities offering. EOS tokens’ former luster was further tarnished last September when extensive wash trading occurred during the ICO.
Author
Chris Munch is a professional cryptocurrency and blockchain writer with a background in software businesses, and has been involved in marketing within the cryptocurrency space. With a passion for innovation, Chris brings a unique and insightful perspective to the world of crypto and blockchain. Chris has a deep understanding of the economic, psychological, marketing and financial forces that drive the crypto market, and has made a number of accurate calls of major shifts in market trends. He is constantly researching and studying the latest trends and technologies, ensuring that he is always up-to-date on the latest developments in the industry. Chris’ writing is characterized by his ability to explain complex concepts in a clear and concise manner, making it accessible to a wide audience of readers.
