Tether Settles with CFTC for $42.5M

The Commodity Futures Trading Commission announced a settlement with Tether Limited for “untrue or misleading claims” about Tether’s reserves.

article-image

Source: Shutterstock

share

key takeaways

  • CFTC has determined that Tether Limited’s stablecoin, USDT, was not fully backed by dollar reserves for 17.5 months between 2016 and 2018, and that Tether and its parent Bitfinex were commingling funds during this time
  • While Tether has indicated that it will pay the fines, it still maintains that USDT was always fully backed — albeit not always in cash

Tether Limited has settled with another US regulator, agreeing to pay a $41 million fine for “making untrue or misleading statements and omissions” about the backing of its stablecoin tokens. 

The Commodity Futures Trading Commission today issued an order settling charges with Tether saying its stablecoin was only backed by reserves for 6.5 months during a period of two years between 2016 and 2018 and that the company commingled funds between its reserve accounts and corporate accounts.

“The order also finds that, instead of holding all USDT token reserves in US dollars as represented, Tether relied upon unregulated entities and certain third-parties to hold funds comprising the reserves,” the CFTC said in a press release

The order also highlighted that Tether failed to provide an audit of its reserves. While various accounting firms under the employ of Tether and parent company Bitfinex have provided attestations about the reserves behind Tether, the stablecoin issuer has yet to provide an audit — which carries significant legal weight. Bitfinex was also fined $1.5 million in the CFTC settlement.

For its part, Tether maintains that the CFTC investigation and order found no issues relating to Tether’s current operations. 

“There is no finding that tether tokens were not fully backed at all times—simply that the reserves were not all in cash and all in a bank account titled in Tether’s name, at all times,” Tether said in a statement published on its website. “As Tether represented in the Order, it has always maintained adequate reserves and has never failed to satisfy a redemption request.”

This fine from the CFTC comes months after Tether’s settlement with the New York Attorney General, in which the stablecoin issuer agreed that, for a period, it did not have one-to-one reserves to cover the issued USDT tokens. At the time, the company loaned Bitfinex $850 million to cover losses Bitfinex incurred when authorities seized accounts belonging to a payment processor called Crypto Capital. Part of this settlement involved the company being barred from offering its services to residents of New York or companies domiciled in the state.

Since the NYAG settlement, the market cap of USDT has more than doubled to a total of over $70 billion.

Tether is also currently being probed by the US Department of Justice for allegedly misleading the banks it once had a relationship with to the nature of its business.

At time of publication, USDT currently remains stable at a one-to-one peg with the USD, according to data from CoinGecko.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2024

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Unlocked by Template.png

Research

With the spot ETH ETF approval, the institutions are coming. stETH - given its dominance in marketshare, existing liquid market structures, and highly desirable properties - is poised for institutions.

article-image

MicroStrategy announced that it bought nearly 12,000 more bitcoin from April to late June

article-image

Unpacking Trump memecoins and the Kraken/CertiK situation

article-image

Instead, the primary path to real RWA growth is dollar-backed stablecoins

article-image

While crypto lawmaking is set to quiet down this summer, bitcoin miner activity appears to be heating up

article-image

The marketplace, which is not yet live, will have validators bid for delegation from some staked solana

article-image

Non-US investors have a new way to access RWA-focused tokens