The controversial crypto exchange Bitfinex will hold an initial exchange offering (IEO) to raise $1 billion to cover for its frozen funds. The final version of the white paper for the sale is still being reviewed.
Bitfinex will first offer its exchange tokens, which are called LEO, to private investors, and after May 10 if there will be any more tokens, they will be available to public investors, according to the information provided by shareholder Zhao Dong.
Zhao Dong has stated that Bitfinex it has so far managed to raise $600 million in private, verbal assurances. In the past weeks, there have been rumors that Bitfinex would launch an IEO, a new fundraising system in which crypto firms sell tokens on an exchange for money.
According to the white paper, the firm has stated that they will be issuing exchange tokens in order to cover the $850 million that are currently frozen in several accounts which are managed by the payment processing company Crypto Capital. Bitfinex along with Tether was sued by the New York Attorney General (NYAG) a week ago for allegedly commingling funds to hide that the $850 million were lost.
Documents cited as “information from the white paper” states that Bitfinex “actively collaborating with the legal investigation and applying to unfreeze these funds through legal procedures” and that the company is “confident that it will retrieve these funds”.
The paper also states that the new tokens will be repurchased every month at market price, with at least 27% of Bifinex’s profit from the preceding month — similar to Wall Street stock buybacks. Bitfinex is also eligible to buy back the tokens within 18 months after its funds are released.
At least 95% of the unfrozen funds will be used to redeem and burn the LEO tokens. Zhao Dong said that even frozen funds will be forever lost, based on Bitfinex’s profits in 2017 and 2018, all the tokens should be bought back by the company in the next 4 years.
Similar to Binance’s BNB, LEO will allow traders to have discounts on trading fees on the Bitfinex platform.
Featured Image: the Cryptonomist