US Investors Used Loophole to Buy Bitfinex Exchange's LEO Tokens

U.S. investors have been able to purchase Bitfinex's LEO exchange tokens, if only indirectly.

Seattle-based Arrington XRP Capital and Los Angeles-based Arca both said they invested in LEO tokens, despite Bitfinex's stated policy of refusing to sell them to U.S. residents or entities.

Jeff Dorman, chief investment officer at Arca, tweeted this month that his firm, which is registered in the British Virgin Islands, had invested in LEO. A spokesperson for the firm told CoinDesk that "Arca legally obtained LEO tokens through a third party" and confirmed that Dorman is a U.S. resident.

While the NYAG maintains Bitfinex has been doing business in New York longer than the exchange says, it has stopped short of claiming LEO tokens were directly sold to U.S. investors.

"LEO tokens also may not be traded on the Bitfinex platform by any United States persons."

A Bitfinex spokesperson told CoinDesk in early July that he "Believed" no U.S. resident could purchase LEO tokens.

Bitfinex announced it was launching its own exchange token earlier this year, after the NYAG office accused it of covering up an $850 million loss.

As part of its efforts to pay Tether back, Bitfinex held an initial exchange offering in May, claiming to raise $1 billion by selling LEO tokens.

The idea behind the token is that Bitfinex would use the proceeds from the sale to repay Tether, and use its own revenue, over time, to repurchase and burn LEO, thereby making all investors whole.

In the meantime, LEO can be used to secure trading-fee discounts on Bitfinex, similar to exchange tokens issued by Binance and others.