Bitcoin exchange Bitfinex sues Wells Fargo for stopping its US dollar remittance business without warning

Golden Finance News - Last Wednesday, April 5, Bitcoin exchange Bitfinex filed a lawsuit against Wells Fargo Bank for suspending Bitfinex's U.S. dollar electronic remittance business, causing losses to the Bitcoin exchange.

Bitcoin exchange Bitfinex files lawsuit against Wells Fargo Image source: Golden Finance

In addition to a “preliminary and permanent injunction against Wells Fargo” preventing the bank from repeating the same behavior, Bitfinex is seeking compensatory damages in excess of $75,000, as well as “equitable supplemental relief” as the court deems appropriate.

The plaintiffs in this lawsuit are Ifinex, which operates the Bitfinex bitcoin exchange, and two other subsidiaries: BFXNA and BFXWW. Tether Limited from Hong Kong is a franchisee of Ifinex, and Tether Limited is the fourth plaintiff in this lawsuit.

The defendants in this lawsuit are Wells Fargo Group and its subsidiary Wells Fargo Bank.

Bitfinex is one of the world's most famous Bitcoin exchanges. Image source: Golden Finance

Court documents in the lawsuit show that Bitcoin exchange Bitfinex is a client of four Taiwanese banks, but not Wells Fargo. However, the Taiwanese bank owned by Bitfinex uses Wells Fargo as an agent to process electronic remittances of U.S. dollars, a common practice for cross-border payments.

Wells Fargo has been acting as a correspondent bank for Taiwanese banks for two years, handling U.S. dollar transactions and inter-account transfers for Bitcoin exchange Bitfinex and its customers’ accounts.

In this session, Bitcoin exchange Bitfinex stated that Wells Fargo knew about their Bitcoin trading business through the KYC process of Taiwan Bank. However, in late March of this year, Wells Fargo notified Taiwan Bank that it would no longer process electronic remittances from Bitfinex's agent account to foreign exchange. But Wells Fargo did not contact Bitfinex, nor did it provide any explanation or request information to the Bitcoin exchange. Wells Fargo stated that when outbound remittances were suspended, electronic remittances into Bitfinex accounts would continue to be processed as usual.

Wells Fargo suddenly stopped the US dollar remittance business of Bitcoin exchange Bitfinex. Image source: Golden Finance

Bitcoin exchange Bitfinex believes that Wells Fargo's sudden move blocked their obligations to customers, which will cause the Bitcoin exchange to lose existing and potential customers because customers will see that their failure to receive remittances is due to Bitfinex's own mistakes. Bitfinex wrote this reason in the documents submitted to the court. In addition, Bitcoin exchange Bitfinex also pointed out:

“Bitfinex told Wells Fargo that if Bitfinex could not remit the USD funds that belonged to its customers, their Bitcoin exchange would suffer a loss of functionality starting April 5. Bitfinex’s development would be forced to a standstill.”

Bitcoin exchange Bitfinex is seeking a preliminary and permanent injunction against Wells Fargo to prevent the bank from "temporarily refusing or directly refusing the U.S. dollar remittance business of Bitfinex's agent account without prior notice" in the future.

Bitfinex also asked the court to make a judgment of more than $75,000 in damages against Wells Fargo because Wells Fargo's improper conduct caused damage to Bitfinex's interests. In addition to a fair trial by jury, Bitcoin exchange Bitfinex is also seeking further relief that the court may deem "fair and appropriate."

Since news of the lawsuit broke, some “insiders” in the Bitcoin community have begun claiming that $180 million from Bitcoin exchanges Bitfinex and Tether.io was frozen by Wells Fargo. The $180 million includes $130 million in customer deposits held by Bitfinex in Taiwanese banks, and $50 million from Tether.

Bitcoin exchange Bitfinex quickly responded to the rumors in the Bitcoin community.

“Bitfinex’s funds were not frozen. Because Bitfinex does not deal directly with Wells Fargo, Wells Fargo only acts as a correspondent bank for the bitcoin exchange’s U.S. dollar business. Their choice to stop Bitfinex from wire transfers to and from its customers gives us an advantage in court.”

Bitfinex officials responded to the incident, saying that the Bitcoin exchange has alternative channels available and that the exchange will not stop operating due to Wells Fargo's blockage. The Bitcoin exchange is currently working hard to process the delayed remittances.