Bitfinex announced that on October 27, that some of the largest BFX token holders have agreed to exchange over 20 million BFX tokens for a stake in the Bitfinex exchange. This shows a return in customer confidence in the company, despite only being a little over two months since one of biggest security breaches of a bitcoin exchange.
“Since the theft more than two months ago, our primary objective has been to make our customers whole,” said Philip Potter, Chief Strategy Officer at Bitfinex. “This is a significant step towards the recovery and stabilization of our company. We are very pleased with this highly favorable trend of conversions.”
While the massive Bitfinex hack made headlines due to more than $70 million worth of Bitcoin being lost, Bitfinex management handled the situation admirably and in a way that was as equitable as possible.
After first stopping all trading, deposits, and withdrawal when the security breach was detected, Bitfinex took a market approach, swiftly compensating all of their affected customers by issuing the BFX tokens. The tokens are redeemable at a value of $1 per token or exchange for shares of capital stock of iFinex.
Bitfinex has developed two methods of redeeming said tokens for equity in iFinex, in the form of SPVs (Special Purpose Vehicle); one in collaboration with Simon Dixon and Bnk To The Future, and one with a smart trust, a concept birthed by Alistair Milne.
The main difference is in the fee structure, and requirements, Bnk To The Future has a minimum of 1,000 BFX and the only fee imposed is a 5 percent charge on any dividends received. The main benefit is the lower barrier to entry, as well as Bnk To the Future acting as an intermediary in the rare situation that something awry arises.
If interested in the BFX Trust, the user must first own or have the means to purchase at least 100,000 BFX tokens. BFX Trust states that choosing their SPV is for investors “who would like more control over their investment.” The fee structure consists of 1 percent of deposits and 2.5 percent of any payments out.
In return for this, however, token holders will receive a multitude of benefits not shared with Bnk To The Future:
- Confidentiality – you will not appear on any share register
- Payments such as dividends will be made directly to your Bitfinex account (e.g. Tether USD) for you to invest/trade/withdraw as you see fit
- You may elect other beneficiaries instead of yourself (e.g. your children)
- You do not need to be an accredited investor
- Personal contact with the trustee
Both forms of redemption seem to be a hit as seen by the massive token exchange experienced recently. To further entice token holders to convert to equity, Bitfinex will also be awarding equity holders with an RRT (Recovery Right Token). If any bitcoin is recovered from the hack, they will be used to pay back any outstanding or uncovered BFX tokens.
If any excess amounts are recovered once all BFX tokens have been redeemed, leftover proceeds will be allocated to RRT holders. Bitfinex is offering a reward bonus that ranges from a 1:1 bonus of BFX token to RRT all the way down to a 1:4 BFX to RRT ratio, valid until November 30. After that, no further RRTs will be offered.
Users not interested in either option need not worry as, since the issuance of these tokens back in August, a total of 2.4964 tokens have been redeemed by the company, applied pro rata to all settled wallet balances meaning Bitfinex is working and providing multiple options to repay the losses their customers suffered.
“We are thrilled to welcome our new shareholders to the Bitfinex community of interest,” Potter said. “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.”