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Next week Bitfinex is expected to issue an initial exchange offering (IEO) to gain $1billion through a token sale. It’s got transpired from the post made by Bitfinex shareholder Zhao Dong.
This information became known from the white paper details posted in Weibo by Zhao Dong. In accordance with the report made by CoinDesk on May 1, they will place $1 billion for sale, priced $1 per piece with a minimum buy of $1 million. It is stated that first LEOs will be offered to private investors and only then to the public (after 10 May) and only in case if the tokens remain.
“The system works on a first-in, first-served basis. If all tokens are fully allocated, we will not have to run the IEO to the retail channel, it will be like a private placement.”
Zhao Dong underlined that “only qualified foreign investors will be allowed to invest”. It was also claimed that they have already earned $600,000,000 from the private sector but only in verbal commitments.
The Reason for Sale
Relying on the white paper, the main reason for such unexpected sale is to provide liquidity to the company. Currently, $850 million of its funds are frozen by authorities. Moreover, Bitfinex was accused of covering up the shortfall with the help of $625 million transfer from Tether. However, Bitfinex mentions in the white paper that it is “actively collaborating with the legal investigation and applying to unfreeze these funds through legal procedures.”
Bitfinex also noted another reason for LEO output, specifically the hack in August 2016 when 119,756 bitcoins (~$72 million at the time) were lost. Based on their words if some bitcoins are retrieved (at least 80%), it may be a good start for the buyout process. Despite this statement by February 2019, Bitfinex had an ability to restore only 28 bitcoins. Hence, this chance does not seem very real.
LEO exchange tokens of Bitfinex will be redeemed monthly with at least 27% benefit from the previous month. It is said in the white paper that at least 95% of the unfrozen funds will go to buy out the LEO in equivalent amount. According to the Dong words:
“Bitfinex will destroy [the] token with full unfrozen funds in the future, in addition to referring to the logic of BNB token”
Still, it is not clear how this operation will go and if it can help Bitfinex to recover its funds. Although Zhao Dong assured that they will do their best to crack the deal.