It is the big question of the crypto industry that has caused much controversy: How exactly is the Stablecoin Tether (USDT) covered by which assets and to what extent or not? New York attorney general Letitia James has now found a pretty straightforward answer after NYAG filed allegations in April 2019 against iFinex, the company behind Tether and the Bitfinex exchange, of inconsistencies around the stablecoin – at least in the past.
“Bitfinex and Tether have ruthlessly and illegally covered up massive financial losses to keep their systems running and protect their profits,” James said in an official statement. “Tether’s claim that its virtual currency was always fully backed by US dollars was a lie. These companies masked the real risk investors were exposed to and were run by unlicensed and unregulated individuals and companies operating in the darkest corners of the financial system. “
Now Tether and Bitfinex have compared themselves with NYAG and agreed to pay a fine and to be more transparent about their own reserves in the future.
Tether CTO Paolo Ardoino: „This Time, Institutional Money is Infusing Bitcoin’s Gains“
Tether will disclose more information about the reserve
Things read a little differently on the part of Tether and Bitfinex. “Bitfinex and Tether are pleased to have reached a settlement with the New York Attorney General. Under the terms of the settlement, we do not admit any wrongdoing. The settlement amount we have agreed to pay to the Attorney General’s Office should be seen as a measure of our desire to leave this matter behind and focus on our business, ”said an official statement.
They would have cooperated fully with the attorney general for two and a half years and provided more than 2.5 million pages of documents. Allegations about Tether’s $ 850 million loan to Bitfinex in 2018 have been cleared. “The loan was granted to ensure continuity for Bitfinex customers. It has since been repaid early and in full, including interest. At no point did the loan affect Tether’s ability to process redemptions, ”it said.
And very important. As part of the settlement agreement, Tether will disclose additional information about the Tether reserves to both the Attorney General’s office and the public. It will be exciting.
“Stablecoin without stability”
The illegal activities of Bitfinex and Tether in New York will now be ended. iFinex, Tether and their affiliates must cease all trading activities with New Yorkers, pay a $ 18.5 million fine, and take additional steps to increase transparency. Even if the trade ban now affects a comparatively small region of the world, New York is of great importance as a financial center.
An investigation by the Office of the Attorney General (OAG) found that iFinex and Tether had made false claims about the coverage of the stablecoin Tether and the movement of hundreds of millions of dollars between the two companies – with the aim of clarifying the truth about massive Covering up Bitfinex’s losses.
NYAG describes Tether as a “stablecoin without stability”, which was not fully covered at all times. According to the OAG, Tether would not have had access to a bank by mid-2017 at the latest and would therefore have temporarily not held any reserves to cover the tether in circulation at a rate of one dollar per tether.
34 billion USDT in circulation
We remember: 2017 was the year of the first Bitcoin bubble. Since then, Tether has been regularly accused of fueling the hype at the time with air money. In the document, NYAG states that there were incidents in 2018 in which the company Crypto Capital Corp. was involved and who had “misled the market and its own customers”. In 2019, $ 850 million disappeared.
The $ 18.5 million fine on Tether and its affiliates and the New York trade ban seem tiny given the size of the USDT market. There are now 34.7 billion USDT tokens in circulation. Tether has become an indispensable part of the crypto market – in the meantime there is even talk of a “tetherization” of trade, because USDT is used as a dollar replacement for trading digital assets. It will now be exciting to see what the demanded transparency in terms of USDT coverage will bring to light.
Tether: The stablecoin printing machines are running at full speed
Update: We have added a paragraph with the official statement from Tether and Bitfinex on the matter.
–
