Bitfinex Withdraws Lawsuit Against Wells Fargo
A week following a lawsuit filed against Wells Fargo for suspending its U.S. dollar transfers, Bitfinex has withdrawn its lawsuit. Few believed that Bitfinex had a chance against Wells Fargo, which acted as the company’s correspondent bank.
Bitfinex’s parent company, Ifinex, originally filed a lawsuit against Wells Fargo & Company and Wells Fargo Bank on Wednesday April 5, for suspending its outgoing U.S. dollar wire transfers. Other plaintiffs in the suit were Tether Limited and Ifinex’s subsidiaries, BFXNA Inc and BFXWW Inc. They requested a jury trial for the case and were seeking “a preliminary and permanent injunction” against Wells Fargo in addition to compensatory damages in excess of $75,000 and any additional relief the court may deem fair.
A week later, on Tuesday, the four plaintiffs filed a “notice of voluntary dismissal” with the District Court of Northern District of California, San Francisco Division, which effectively withdraws the lawsuit. The four plaintiffs “voluntarily dismiss without prejudice” the action against Wells Fargo, the court document reads, noting that:
This notice of voluntary dismissal is being filed with the Court before service by defendants of either an answer or a motion for summary judgment.
Little Chance of Success
At the time of writing, Bitfinex has not issued a statement as to why the lawsuit was withdrawn.
However, some in the community believe the company stood very little chance against Wells Fargo. One Reddit user wrote: “Wells Fargo will argue that Bitfinex has no standing for the suit; its banking relation can use a different correspondent.” Another user wrote: “they [Bitfinex] will lose the lawsuit because 1) they have no standing, 2) banks are allowed to discriminate against wire transfers (see operation Choke Point).” Furthermore, the user questioned why Bitfinex did not have multiple banking partners, and suggested the company should use their resources to find a better correspondent banking partner instead of wasting time on “a lawsuit they know they will lose.”
A Bitfinex representative responded to the Reddit thread, stating: “we work diligently to foster these relationships and develop new ones as a matter of routine”, adding that they have other options to be explored. “We have alternative channels available to us and are working on processing withdrawals at a delayed pace due to the operational overhead involved,” he added.
The problem of large banks discontinuing correspondent banking relationships with smaller banks is not an uncommon one. Banks can stop doing business with any bank in any country “because the compliance costs are too high or because the risk profile of the entity it is dealing with, is too high and not manageable”, according to a World Bank’s report on the decline in correspondent banking. Banks cannot be forced to continue correspondent banking relationships if they claim the risks are too high.
Throughout the whole ordeal, Bitfinex has assured customers that their funds are not frozen by Wells Fargo, which is only acting as a correspondent bank.
Do you think Bitfinex did the right thing by withdrawing the lawsuit? Let us known in the comments section below.