Bitfinex Will Raise $1 Billion in LEO Token Sale, Revealed Shareholder Zhao Dong
Zhao Dong, a shareholder of the embattled crypto exchange Bitfinex, disclosed details that the exchange is attempting to launch an IEO to raise $1 billion in its new native token LEO sale, in the wake of some contentious activity regarding Bitfinex’s reserves.
According to Bitfinex’s official document released in a tweet from Zhao, a maximum of USDT 1 billion worth of LEO tokens will be issued by Unus Sed Leo Limited, a company formed for the purpose of token issuing at the direction of iFinex, the company behind Bitfinex and Tether USDT.
The token will be sold in a private offering only to invited investors, and later opened to the public after May 10 if there is any allocation left. According to Zhao, the exchange has already raised $600 million in private with verbal commitments.
The LEO token, described as the utility token at the heart of the exchange’s ecosystem, will allow its holders to get a fee discount on crypto lending, withdrawal and deposit on Bitfinex, iFinex’s EOSFinex decentralized exchange, as well as the ERC-20 trading platform ETHFinex.
The doc further detailed that the issuer iFinex and its affiliates will buy back certain amount of tokens on a monthly basis – “equal to a minimum of 27% of iFinex’s gross revenues from the previous month” – until no more than 100 million LEO tokens remain.
Notably, Bitfinex reserves the right to buy back the tokens within 18 months after its frozen funds are recovered. In fact, at least 95% of the unfrozen funds will be used to redeem and burn the LEO in an equivalent amount. Zhao Dong said that even if the seized money cannot be retrieved, according to the projections from Bitfinex’s profits in 2017 and 2018, the exchange should be able to buy back all of the tokens within 4 years.
In 2017, Bitfinex netted in $326 million in profit and gave out $246 million to its shareholders; the exchange profited in $404 million and paid out a dividend of around $261 million in 2018, according to Bitfinex’s financial figures released by Zhao’s DFund.
The crypto community has been in an uproar after the New York State’s Attorney General’s office accused Bitfinex of secretly using Tether’s USD reserves which should back the stablecoin to cover up an $850 million fund shortfall in its finances. Though the exchange has denied the charges, saying the funds has been “seized and safeguarded” by Polish, Portuguese, U.S. and UK authorities which only needs “a few weeks to be unfrozen”, it is now attempting to raise $1 billion in a bid to cover the frozen $850 million funds.
The move of the exchange reminds many of its solution after it got hacked in 2016. On August 2, 2016, nearly 120,000 BTC (worth about $75 million at the time) was hacked on Bitfinex. Back then, the exchange figured out a debt-to-equity token named BFX as a temporary measure and promised to buy back these tokens from investors who lost funds in its 2016 hack. That’s how the Chinese bitcoin whale Zhao Dong became one of Bitfinex’s shareholder. Eight months after the incident, the company said on April 3, 2017 it had bought back all the BFX tokens and alleged to have paid these investors generous profits.