BFX Valuation: Venture Capital Financing

How about financing, then? Bitfinex could get out of the woods with a large-enough raise. Bitfinex stated that they are shopping themselves to potential investors. If they received outside investment, a portion of funds raised could go towards repaying BFX holders.

Any serious potential investor in Bitfinex will have more data about the true financial position of Bitfinex than we do. They will be able to make a more informed decision as to the viability and future profitability of the business.

BFX tokens carry no legal standing. However if Bitfinex receives a large round of investment and refuses to compensate BFX token holders, customers will cry bloody murder.

To further complicate matters, consider these excerpts from the BFX Token terms:

  • The token has been issued to you without reduction of or other release or waiver of any claims you may have against the Bitfinex Group.

Yet, in the transference terms:

  • By transferring a token to another person, all transferors thereby assign to the respective transferees any claims that the transferor has against the Bitfinex Group on account of the Losses.

Do users who have sold their BFX tokens still have a claim? If a court decides that they do, the total loss could grow to well over the original $72 million.

Regardless of the industry, investors fund growth, not debt quagmires. Unattractively, a large portion of money invested in Bitfinex will go straight towards debt repayment.

Further complicating matters is the uncertainty of the legality of Bitfinex’s actions. According to Phil Potter, Bitfinex is provisioning for future lawsuits. Phil has been in the game a long time, and knows how expensive a legal battle with one or more alphabet letter government agencies can be.

With an equity investment, potential investors could be signing themselves up for an expensive and protracted legal battle. Unless Bitfinex management is willing to accept significant dilution, I doubt white knights wielding shining term sheets will appear to rescue BFX holders.