Did the CFTC order Bitfinex to store customer's Bitcoins in a hot wallet?

in #security8 years ago (edited)

It now appears that the $70 million Bitfinex compromise may have been the direct result of a CFTC order requiring them to, effectively, store customer's funds in a hot wallet rather than a cold wallet.

"During the Relevant Period, Bitfinex did not actually deliver bitcoins purchased on a leveraged, margined, or financed basis to the traders who purchased them within the meaning of Section 2(c)(2)(D)(ii)(III)(aa) of the Act. Instead, Bitfinex held the purchased bitcoins in bitcoin deposit wallets that it owned and controlled. Therefore, Bitfinex engaged in illegal, off-exchange commodity transactions and failed to register as a futures commission merchant, in violation of Sections 4(a) and 4d of the Act, 7 U.S.C. §§ 6(a) and 6d." - CFTC Order

Update: It now seems this is not true. Bitfinex's decision to keep customer funds in a multisigned hot wallet appears to have had nothing to do with any CFTC or regulatory requirements.

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Nice @joelkatz
Shot you an Upvote :)

Hi! This post has a Flesch-Kincaid grade level of 13.0 and reading ease of 38%. This puts the writing level on par with academic journals.