Lawyer Warns Bitfinex on 'Threats' Against Blogger

"Bitfinex'ed," the pseudonymous blogger and persistent critic of cryptocurrency exchange Bitfinex, has hired a prominent lawyer amid a long-running battle with the controversial company.

Stephen Palley

, a partner at the Washington, D.C.-based law firm Anderson Kill, fired off a sternly worded letter Monday to Bitfinex's general counsel, Stuart Hoegner. In the letter, a copy of which was obtained by CoinDesk, Palley warned that if he finds that the exchange is behind "threats" that have been made against his client, "there will be legal consequences."

Palley wrote to Hoegner:

"As you know, threats have been made and continue to be made against @bitfinex’ed. If we learn that your client is directly or indirectly responsible for these threats, or if any harm should take place to @bitfinex'ed as a result of these threats, there will be legal consequences."

Palley's relationship with the pseudonymous blogger dates back to December when Bitfinex publicly threatened legal action against Bitfinex'ed. The blogger hired Palley that month but kept the engagement quiet until now.

A spokesman for Bitfinex did not respond to a request for comment by press time. When reached by CoinDesk, Palley would not elaborate on the nature of the threats, citing security concerns. But Bitfinex'ed claimed last year that someone had offered a five-figure bounty for personal information about the blogger.

More recently, after the @Bitfinexed account was briefly suspended from Twitter, the user accused Bitfinex of hiring bots to "mass report" its critic (a charge the exchange denied).

Bitfinex'ed has been writing critical and highly detailed posts about the exchange since August of last year. Many of the posts have focused on the relationship between Bitfinex and Tether, the issuer of USDT, a "stablecoin" linked to the U.S. dollar that is perhaps as controversial as the British Virgin Islands-based crypto exchange.

In the blogger's view, Tether (which has common ownership and management with Bitfinex), has been issuing more USDT than it has dollars in the bank in order to artificially inflate the price of bitcoin.

Tether had long maintained that a forthcoming audit from Friedman LLP would show that its token was fully backed. But in January, Tether said the relationship with Friedman had ended, without explaining who dumped who or why.

While the severing of ties with Friedman has fueled doubts about Tether's financials, other observers have argued that the company is limited in what it can reveal about its finances. For example, if it were to identify its banking partners, those institutions might get in hot water with regulators given the current environment.

Still, concerns linger that Tether poses a systemic risk to the broader cryptocurrency market, given USDT's prominent role as a source of liquidity.

Crossed swords image via Shutterstock.