Stablecoin Tether is the main focus of financial watchdogs and regulators in the United States. This new controversy around the stablecoin started when Bloomberg posted a report investigating into the reserves that back the digital currency. At the moment, there is around $69 billion worth of Tether coins in circulation.
As soon as Bloomberg published the report, the CEO of Tether Jan Ludovicus van der Velde posted a retaliating statement on his Twitter profile. He then proceeded to delete his Twitter account altogether. A few days later, Tether posted a response to the Bloomberg article on its blog claiming that the data for this defaming article has been provided by former Tether banker John Betts. Tether also claimed that Betts was fired due to egregious and wasteful decisions.
CFTC Took Notice against Tether
It is important to note that Tether has promised its investor that every unit of the stablecoin is backed by one dollar at all times. However, the recent findings of the CFTC have found out that Tether management has been lying to their investors. The CFTC acting chairperson Rostin Behnam told the media that Tether has not conducted any audits since 2018 and has been keeping a manual record of the money reserves.
The CFTC investigation also revealed that in 2017 when around 442 million USDT coins were in public circulation, Tether had only $61.5 million in its backup reserves. The management of Tether has agreed to pay fines of $41 million without admitting or denying the allegations of the CFTC prosecutors. The management of Tether has also claimed that they are going to keep improving their policies to maintain a trustworthy relationship with their clients.
Letitia James, the NYC Attorney General for the Department of Justice, has posted allegations on Bitfinex recently. Bitfinex is a crypto exchange platform that is backed by Tether. The case charges the crypto exchange for hiding losses from their clients and fabricating the real state of their reserves. In 2018, Tether transferred $850 million to Bitfinex without accounting for its USDT reserves.
The Tether affiliate has also agreed to pay the Department of Justice fines of $18.5 million without admitting or denying the allegations. Tether has also changed its previous declaration that every USDT token is backed by one dollar at all times. It has now updated its website, stating that its reserves include assets and receivables to third parties that can also include affiliated entities. The incriminating article published by Bloomberg claims that Tether is backed by questionable assets in addition to Chinese debt.