BREAKING: Central Bank Reports Prove Bitfinex & Tether DO NOT Have Banking in the Bahamas with Deltec
This piece provides definitive research and accounting statements from the Central Bank of the Bahamas to prove that Bitfinex never opened up a bank account with Deltec bank.
This piece should be held in higher regard than any other claims made to the contrary because, unlike those claims, this report does not rely on conjecture or hearsay. Rather, this conclusion was formed as a result of a CPA’s financial investigation into the accounting records of the Central Bank of the Bahamas.
Deserved credit goes to Marcel and Luis from Radarbtc for the lead as well as an overview of the investigative research by their accountant.
Brief Summary of the Alleged Deltec Banking Relationship with Tether
For those that are not aware, Tether published a letter in the first week of November (2018) allegedly addressed to them by Deltec bank in the Bahamas confirming that they possessed $1.8+ billion total in all of the accounts that they hold with the financial institution.
If you have not seen it, here is a link to the original letter below:
If you have any trouble accessing the link (its been acting weird for us), it is also posted in full below as well:
Summarizing here, the letter is addressed to Tether Ltd., and it states within that the aggregate cash value of Tether’s portfolio was $1,831,322,828 (approx.; no denomination given) as of October 31st, 2018.
Why This Letter Was Important
Throughout the year, numerous individuals have questioned whether the company Tether Ltd., truly possesses the dollar reserves to match the number of Tether tokens that they have issued throughout 2017 and 2018.
The reason why this issue is of importance is because if it is found that each Tether token is not backed by a corresponding dollar, then the company would essentially represent one of the largest frauds in recent history because this revelation would mean that the company was ‘creating’ money arbitrarily.
However, many individuals in the community took the bank’s alleged affirmation of Tether’s funds to be conclusive proof that the tokens were/are backed 1:1 with a corresponding number of U.S. dollars. There were some detractors after Tether Ltd., posted this news, such as Bloomberg, whom casted doubted on the letter’s authenticity.
Substantial Hearsay and Conjecture
The issue with the majority of theories that have been posited by the crypto community and its reporters is that they generally contain conjecture and hearsay.
Even when looking at the Deltec banking letter and the subsequent confirmation by a banking employee, we as the crypto community are forced to assume that these reporters are being entirely forthright and honest.
The same is true of those that are detractors of Tether and Bitfinex as well. For example, when Bloomberg posted that the DOJ investigation into crypto is now narrowly centered on Tether and Bitfinex, we are forced to accept that their word is accurate and that their sources are credible.
However, this article will not engage in such speculation. Instead, we will look at the raw numbers of the Bahamian banking system as well as what has already been reported and agreed to as truth by the representative parties (i.e., Bitfinex and Tether), and use this information to definitively prove that there is absolutely no way that Tether/Bitfinex are holding the funds that they claim to have in the Bahamas.
The Central Bank Report: Bahamas
This banking report is an aggregate of all of the funds that the banks in the Bahamas have collectively.
This includes assets and bonds as well (M2 assets). Since their economy is exponentially smaller than the U.S., they only have about $6.7B total in all of these accounts right now.
iFinex claims they moved almost $2B there.
There is literally zero fluctuation in the amount of money OR assets that they’re holding. That includes bonds and other assets that can be liquidity.
For those that do not know what M2 assets are, here is a quick definition from Investopedia:
What Central Bank Statements?
The Central Bank of the Bahamas posts a monthly financial statement that provides aggregate financial metrics for all of the banks on the island.
Here is the link to the latest report (for October):
After accessing the link, this should be the first page that you see in the pdf document:
The reason why these monthly financial overviews are relevant to the claim that iFinex has successfully obtained banking with Deltec in the Bahamas is because these monthly statements should reflect an influx of $2B+ U.S. dollars entering their ecosystem at some point during the year.
However, they do no such thing.
Again, this is not an assumption or conjecture — this is a conclusion based on the direct assertion by Bitfinex/Tether on their social media account on November 1st, that they were holding these funds in a Bahamian bank account.
But before we seriously dive into the accounting of this banking report, there are some likely counter-arguments that we must rebut.
Potential Counter-Argument #1: The Central Bank Report Only Looks at Funds Denominated in Bahamian Currency, Not USD
Anyone reading up to this point and viewing the central bank’s report may be inclined to believe that one should not expect to see the influx of Bitfinex/Tether’s capital infusion into the Bahamian banking system to be reflected in the report’s accounting because their funds were (most likely) denominated in USD and the report only accounts for Bahamian dollars.
However, this assumption is untrue. The financial report does account for U.S. Dollars.
Below, are some screenshots from the central bank’s financial report that should be more than adequate as confirmation:
The above screenshots from the latest financial report of the Central Bank of Bahama should sufficiently dispel the notion that any U.S. dollar deposits into a Bahamian bank would not be accounted for.
In addition, for those wondering what the currency conversion between the Bahamian dollar and the USD is, it is conveniently pegged 1:1
Analyzing the October 2018 Report
In analyzing this report, we are looking for accounting that corroborates the influx of approximately $2 billion in the Bahamian banking system at some point this year.
First, we will view the aggregate liquidity & foreign assets of the entire Bahamian banking system for 2018:
1 = $1 million
In 2018, thus far, the Bahamian banking system’s net foreign assets are at -$103.97 million.
Let’s analyze some of the other categories here as well.
External Liquid Assets
This refers to the aggregate amount of foreign cash that all of the banks in the Bahamas are holding.
Currently, that total amounts to approximately $1.7 billion.
That means that the entire banking system of the Bahamas is currently holding less cash than what Tether/Bitfinex claims that they have deposited there in 2018 (and should still have based on the amount of floating Tethers in the market).
This refers to the amount of money that banks have stored in different jurisdictions and locations (i.e., nostro banks).
Thus far, the aggregate total for all banks in the Bahamas is $1.3 billion, which means that they could not have transferred the $1.9 billion that they allegedly received from Bitfinex to an external reserve this year either.
‘Excess Reserves’ refer to the aggregate amount of foreign capital that all of the Bahamian banks are holding in excess of the ‘target’ amount set by the Central Bank of the Bahamas.
Again, this metric shows that the Bahamas are actually seeking to offload more currency than what foreign demand will allow them at this point. This is yet another fact strongly contradicts the idea that Bitfinex/Tether ever sent over $1.9 billion to the Bahamas.
Analyzing Foreign Exchange Transactions as of October 2018
This is another category in the central bank’s financial report.
We have posted it below for your convenience:
In the above picture, we can see a ‘net purchase from others’ of $722 million as well as a ‘net sales to others’ of $499 million (in Bahamian dollars) for the YTD [year-to-date; 2018].
These totals (among several others that we’ll cover) completely defy the idea that Bitfinex/Tether ever deposited $1.9 billion into the Bahamian banking system in 2018.
Looking at Total Bank Deposits
This is yet another portion of the accounting sheet that definitively shows that there is no possible way that Bitfinex has deposited $1.9 billion with Deltec bank.
Let’s take a look at the accounting below from the central bank’s financial report:
As we can see from the accounting above, the aggregate amount (in deposits) that the Bahamian banking system has currently is $6.4 billion.
While that, in itself, does not disprove the notion that Bitfinex/Tether could have banking in the Bahamas, the fact that there is little fluctuation in this total throughout the entirety of 2018, does.
Revisiting the Recent Bloomberg Affirmation of Tether
Recently, Bloomberg posted an article titled, ‘Crypto-Mystery Clues Suggest Tether Has the Billions It Promised’.
In the article, the author, Matt Leising, reports that he met with representatives of Bitfinex/Tether and was shown multiple bank statements that appear to corroborate the notion that Bitfinex/Tether have always possessed the necessary reserves to back their Tether token.
One tidbit of information that was divulged to Matt Leising of Bloomberg, which is critical to our investigative research, is the following highlighted quote:
The quote states:
“The latest statement, from July 2018, shows a beginning balance of $1.9 billion on July 1 and an ending amount of $210 million on July 30. The balance dropped as the company shifted funds to Deltec Bank & Trust Ltd. in the Bahamas, according to people familiar with the matter. Attempts to reach Deltec and an attorney representing Noble weren’t returned.”
The important takeaway here is that Matt Leising’s sources (which are Bitfinex/Tether advocates) stated that approximately $1.7 billion was drained from Bitfinex’s Noble Bank account in July 2018, and subsequently moved to Deltec Bank in the Bahamas.
Therefore, we should be able to corroborate this information by looking at the central bank’s financial reports for the months of June, July, and August in order to get a comparative view and fully encompass the time period for which Bitfinex was allegedly infusing this capital into the Bahamian banking system.
Analyzing the June, July, and August Bahamian Central Banking Statements
Above, is the deposit base for the Bahamian banking system in June
Above is the deposit base for the Bahamian banking system in July
Above is the deposit base for the Bahamian banking system in August
Links to the Reports:
No Noticeable Changes
If one were to analyze the three monthly reports posted above, one would notice that there is hardly any palpable difference in any of the accounting categories between the reports.
There is certainly nothing in these reports to support the notion that there was an influx of $2 billion into the Bahamian system and we’ve already thoroughly debunked the idea that there is some way that Bitfinex could have deposited this amount into the Bahamian banking system without it being reflected in these accounting reports in some way.
Not to mention, there was a period of time when there were approximately $3 billion Tether tokens outstanding, so we should have not only observed a massive inflow of capital into the Bahamian banking system, but a massive outflow as well when Bitfinex/Tether burned approximately 500 million Tether tokens in the space of a week.
It is Unlikely That Deltec Bank Could Even Accept $1.9 Billion Even if They Wanted To
According to the Bahamian Central Bank’s website, there are strict financial regulations that limit the amount of foreign currency that each financial institution is allowed to hold.
That information can be found here on their official website:
On the site, they specifically state:
“By virtue of the fixed exchange rate and exchange controls, which limit the net foreign currency exposure that commercial banks are allowed to have in their local operations, the Central Bank acts as the reservoir for excess foreign currency flowing through the economy, and is obligated to meet any net shortfall that the system experiences.
The seasonal pattern of flows is such that the Bank acts as a net buyer of foreign exchange during the first half of each year and as a net seller during the second half. International quotations, obtained daily, are used to determine exchange rates between the Bahamian Dollar and foreign currencies, particularly for non-US currencies. The rates are communicated to the commercial banks, and become the basis of the rates at which those banks buy and sell foreign exchange from and to residents.
The Central Bank utilizes a part of its external reserves to maintain the local trade market in foreign-exchange currencies between itself, the Government, Public Corporations and the commercial banks. The excess of the reserves from the local market is invested on the international market in short-term deposits, foreign government securities and bonds.”
Therefore, there is simply no way that:
A) $1.9 billion in funds could have traversed through the Bahamian banking system while being unaccounted for in the monthly reports we’ve reviewed.
B) Deltec bank was able to seamlessly accept $1.7 billion over the course of one month without us seeing a dramatic shift in the aggregate foreign currency reserves of the banking system. Again, it is worth noting that this alleged total exceeds that of the grand total of all aggregate foreign currency liquidity and reserves for the entire Bahamian banking system.
This piece was not written as a means of ‘FUD’, to disrupt the markets, or with any alternative motive in mind.
Cogent research was performed that exposed significant discrepancies in Tether/Bitfinex’s claim that they had successfully obtained banking in the Bahamas. Thus, this report was compiled as a means of providing greater transparency in a space where its actors do not seem to feel obligated to do the same.
This is being published in the greater interest of all cryptocurrency investors.