iFinex Proposes $150 Million Share Buyback from Bitfinex Hack Victims
iFinex, the parent company of Bitfinex, has proposed to repurchase $150 million worth of its shares distributed to customers as compensation for a 2016 security breach on the Bitfinex cryptocurrency exchange, according to a Bloomberg report. The breach, which occurred in 2016, resulted in a loss of $71 million, with around 36% of Bitfinex's total user balance, entirely denominated in Bitcoin, being stolen. Due to insufficient cash reserves at the time, Bitfinex could not refund the affected customers.
To address the financial shortfall, Bitfinex issued recovery-right-tokens (RRT) and iFinex shares to the impacted users, valuing each share at ten dollars. A total of 15 million shares were distributed, stemming from a stock exchange transaction in 2016 via the BnkToTheFuture investing platform. Affected customers received RRT BFX tokens, which were later redeemed by iFinex through BnkToTheFuture for company shares.
On September 22, iFinex communicated its buyback intentions to its shareholders through a letter. The move, motivated by the company's "positive performance" over the recent years, aims at offering liquidity to investors holding the somewhat illiquid shares. The buyback program is set to be selective, available only to a limited number of iFinex and its subsidiaries' directors. There is no predetermined minimum shareholding requirement to participate in the buyback, and shareholders have until October 24 to decide on the offer.
Following the share distribution, iFinex's valuation soared to $1.7 billion post the $10 per share offering, a significant leap from its $120 million valuation in 2016. The share buyback proposal reflects a move to re-consolidate ownership amid a heightened valuation, providing an exit opportunity for the early investors who were forced to take equity as compensation.