Bitfinex Enables Bitcoin Cash Deposits and Withdrawals but Credits 15% Less

Bitcoin exchange Bitfinex announced on Friday that it has started allowing Bitcoin Cash deposits and withdrawals. However, some customers were upset when they learned that the exchange credited their accounts with approximately 0.85 BCH per bitcoin instead of using the typical 1:1 ratio.

Also read: Coinbase Reverses – Plans to Allow Bitcoin Cash Withdrawals in January 2018

Deposits and Withdrawals Enabled

Bitfinex announced on Friday that the platform has started allowing deposits and withdrawals of Bitcoin Cash (BCH), the new cryptocurrency which resulted from the August 1 Bitcoin network split.

Bitfinex Bitcoin Cash Deposits Withdrawals Credits 15% Less

The announcement came the day after the exchange started BCH margin trading and had recently completed crediting its customers with approximately 0.85 BCH per bitcoin held at the time of the fork.

Customers Shortchanged

Bitfinex explained that its distribution methodology took into account margin positions Bitfinex Bitcoin Cash Deposits Withdrawals Credits 15% Lesswhich led to a deficit in BCH to pay customers with. Specifically, “margin longs in BTC/USD and margin shorts in XXX/BTC” did not receive BCH and “margin shorts in BTC/USD and margin longs in XXX/BTC” did not pay BCH. Meanwhile, customers holding bitcoin and bitcoin lenders at the time of the fork received BCH. Bitfinex declared:

We will be resolving this discrepancy in the form of a socialized distribution coefficient.

The exchange subsequently detailed that its methodology has yielded the distribution coefficient of 0.7757, so customers would only get 0.7757 BCH per bitcoin.

Not First Customer Loss Socialization

This is not the first time Bitfinex has used the tactic of spreading the losses among its customers. One year ago, the exchange announced its plans to use the same tactic of distributed loss allocation in the wake of its April 2016 hack and theft of 119,756 bitcoins.

Bitfinex Bitcoin Cash Deposits Withdrawals Credits 15% LessBitfinex said at the time that it would initiate “a socialized loss scenario among bitcoin balances and active loans to BTCUSD positions.” It then promptly issued digital IOUs to its customers that allowed both the trading and redemption of their missing bitcoins at a later date.

Despite many early complaints from its customers, the tactic worked for Bitfinex to avoid bankruptcy. In April, the company announced that it had successfully paid back all customers.

Unlike the plan formulated a year ago, however, the exchange’s BCH distribution policy does not offer an IOU to customers for their missing 15%.

Large-Scale Manipulations

Bitfinex Bitcoin Cash Deposits Withdrawals Credits 15% LessThe exchange claims that following its methodology announcement on July 27, “several accounts began large-scale manipulation tactics” such as wash trading and self-funding shorts. These actions were “an attempt to obtain BCH tokens at the expense of exchange longs and lenders on the platform,” the exchange described, adding that it has sanctioned the manipulators for violation of its terms of service.

These manipulations caused the BCH distribution coefficient to plummet, Bitfinex explained, and said that they then decided to adjust the coefficient to “disallow any hedged BTC balances in excess of any such hedged balances that may have existed at the time of the July 27th distribution announcement.” In the end, the coefficient was increased to roughly 0.85 BCH per bitcoin. The exchange noted:

This adjustment increases the distribution coefficient from 0.7757 to 0.8539.

Distribution Unfair?

Customers who were not margin trading on Bitfinex recently were particularly unhappy with receiving 15% less BCH compared to most other exchanges which offer a 1:1 ratio.

One user tweeted, “[I] joined Bitfinex to split my bitcoins to BTC + BCH. Didn’t borrow, go long or short. Got 15% stolen by the exchange.” Another user concurred, “same here, it’s totally thief. We don’t play margin, or have any responsibilities for Bitfinex’s lost, we have no reason to pay 15% 4 that.” Another tweet directed at the exchange noted:

Thanks for your solid platform, however lots of users are angry about your distribution policy which is considered unfair, 0.85!

However, Bitfinex maintained its stance that “the intent of the BCH distribution mechanism was to protect lenders who were already locked into loans at the time of the announcement and to avoid distributing negative balances to shorts on an uncertain value of an unproven digital asset.”

What do you think of Bitfinex’s approach to distributing BCH to its customers? Let us know in the comments section below.

Images courtesy of Shutterstock, Bitfinex, Twitter

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  • Alfey

    To be fair, Bitfinex announced in advance how they were going to do the distribution, there was time to move BTC out of the exchange before the split happened if the owner was unhappy with the announcement.

    • Frutiv Academy

      It impractical for an exchange like bitfinex

    • Peter Griffin

      To be fair, they’re filthy scammers.

  • Shomius


  • Frutiv Academy

    Bitfinex has just robbed its client, it is a lie that margin trading has brought about deficit, only a mathematical ignorant people will believe this, if they need to balance their calculations, let them contact me, you credit 1:1 to every person that is in the possesion of the coin at the time of split and it should be clear who owns a coin at a particular point in time, the borrower or the borrowee,

  • Matthew Lyon

    It was total theft. Did Bitfinex incur any losses due to those margin traders? No. What happened to the BCH that was held by the exchange from those margin positions? Bitfinex kept it. 20000 BCH is a lot even after it dropped

  • Bitfinex is funding a float. Ask them to account for their loss in detail.

  • Blabamouth

    No ways. Why should lenders and borrowers be protected at the expense of ordinary traders? They should damn well carry the weight of their own activities and not spread them to ordinary users. This is basically a tax on ordinary users.

  • No_Rep

    “to avoid distributing negative balances to shorts”

    It is not like the rules for short and margin trading need to be re-invented here. Brokerage houses have established that short sellers must re-imburse the owner for everything he would have received had he not loaned out the property, plus interest. The exchange is there to ensure that the margin/short trader has the equity to do that. What Bitfinex has done is bizarre.

  • Sergiy Perederiy

    When clients sents BTC to Bitfinex deposit They thought that It will be safely as if it been on their personal wallets and they will get BCH. But it is seems like Bitfinex took that 15 % BCH. I do not understand why someones who keep BTC on margin or funding position take the extra profit in BTC and also in BCH, at the same time thay do it taking BCH from the wallets of other people. I think that Bitfinex needs to separate their profit in BTC from the profit in BCH. They have the right to get the profit in BTC but they not have right also take the double profit in BCH, because it taks from accounts of the others members who have BTC on exchange wallets and incuring losses. I think the rights of members who keep the BTC on the exchange wallets have to be defensed at the first turn like the bank deposit if Bitfinex does appreciate the honor. Bitfinex received BCH 1:1 to BTC and must to give it with the same proportional. Only this way can safe the trust and prestige of Bitfinex exchange.