Tether Fined $41M For Lying About Fiat Reserves
Tether Limited, the organization behind the eponymous Tether (USDT) stablecoin, has been fined a substantial sum for lying about the fiat reserves backing its stablecoin. It was fined $41mn by the US Commodity Futures Trading Commission (CFTC).
- According to the CFTC’s press release, Tether lied to customers that it had sufficient dollar reserves to back every issued USDT token whereas it did not for a long period of time. Over a 26-month sample period from 2016 through 2018, the CFTC said Tether only had sufficient dollar reserves for all its tokens 28% of the time, whereas it lied that it was “fully-backed” all the time.
- Also, the CFTC said Tether failed to disclose to customers that it had unsecured receivables and non-fiat assets in its supposed cash reserves. The organization further lied to customers that it would undergo routine, professional audits of its reserves but has failed to do any, the CFTC said.
- For its violations, the CFTC fined ordered Tether to pay a $41mn penalty and cease further violations as charged. The organization’s affiliated crypto exchange, Bitfinex, was also fined $1.5mn but for an unrelated case of allowing crypto derivatives trading on its platform without the due license(s).
- Ideally, Tether Limited is meant to operate as a regulated bank with all its customer deposits available if they decide to withdraw “redeem” them, but this is the wild world of cryptocurrencies, so we shouldn’t expect such a thing. It may be a house of cards waiting to fall…
- Notably, Tether Limited has received $69 billion in real dollars in exchange for its tokens. That’s a substantial sum that could shake the crypto markets if the scheme collapses.