Cryptocurrency News

Tether Executives are Being Investigated by the Department of Justice

By July 27, 2021 No Comments

Key takeaways:

  • On Monday, Bloomberg reported that the Department of Justice is investigating Tether, focusing on the company’s conduct from years ago.
  • While the DOJ probe is confidential, the New York Attorney General’s office report from February sheds some light on the potential subject matter of the latest investigation.
  • Tether has responded to the allegations, calling the report “repackaging stale claims as ‘news’.”

As reported by Bloomberg on Monday, executives at the helm of the biggest stablecoin in the market are facing a probe by the Department of Justice (DOJ). DOJ is searching through Tether’s old records and “scrutinizing whether Tether concealed from banks that transactions were linked to crypto”, the report said.

Tether and its sister exchange Bitfinex are repeatedly getting scrutinized by the authorities

As of this moment, it is not yet known what exactly the DOJ is searching for since the probe is confidential. Per the report, the officials are focused on business practices that have taken place years ago.

However, an earlier legal battle between cryptocurrency exchange Bitfinex, Tether and the New York Attorney General’s office can shed some light on the matter. After the parties settled and crypto firms Bitfinex and Tether agreed to an $18.5 million settlement in February, the AG’s office released a report which might hint at what the DOJ is looking for via its latest probe.

In the report, the New York attorney general’s team wrote that “at no point did Tether inform its clients or the market that from at least June 1, 2017 until September 15, 2017, tethers were not in fact not backed “1-to-1” by USD held by Tether in a bank account.” The report adds that the Tether funds were controlled by its General Counsel. 

Tether denies all accusations, calls the latest report a “continued effort to discredit Tether”

Since the Bloomberg report came out on Monday, Tether has published a statement calling the news article disingenuous and accused Bloomberg of trying to discredit the crypto company.

“This article follows a pattern of repackaging stale claims as “news.” The continued efforts to discredit Tether will not change our determination to remain leaders in the community.”

– Tether’s statement on Bloomberg’s article

In the statement, Tether reassured that it is working closely with law enforcement agencies as a part of an effort to conduct its operations as transparently as possible.

Many people in the industry are scared of what Tether’s downfall might bring

USDT, the largest USD-backed stable digital currency, has been a lingering concern in the cryptocurrency sector since its inception in 2014. In the years following its initial launch, Tether has cemented its role as by far the biggest stablecoin in the market. 

For the majority of days, it is the most traded cryptocurrency in the market by daily volume as it allows stable transfers of funds in crypto, where most coins are subjected to high volatility. Adding to its shady backing system, Tether has previously also faced allegations of price manipulation.

For these reasons, many in the crypto space have wished for a USDT-free market. While its utility is immense, the potential blowout that would happen if Tether were to fail, would be on par with crypto’s largest hacking attacks and scams, if not greater.

“Since the beginnings of the Tether foundation, there have been market participants questioning the stablecoin’s reliability.”

– Chris Dick, a quant trader at B2C2