The U.S. Commodity Futures Trading Commission (CFTC) has slapped Tether with US$42.5 million in penalties, saying it made “untrue” and “misleading” statements and “omissions of material fact” in its management of the USDT stablecoin over several years. At the heart of the case were Tether management’s public claims that each “tether” unit was backed by one unit of its corresponding fiat currency (mostly USD, but also EUR and others).
This is Bitfinex/Tether CFO Giancarlo Devasini in 2014.
Here’s what he thinks of audits.
This company has had $850 million USD seized, due to criminal bank fraud charges, and $61 million in civil fines for lying about reserves, they claim to have $69 billion today. No audits. pic.twitter.com/8eUNzulEWW
— Bitfinex’ed 🔥 (@Bitfinexed) October 18, 2021
CFTC warns Tether not to break the law again.
Tether had also regularly shuffled reserve funds between unregulated partner entities, the Bitfinex exchange, and other third parties and “backed” its tokens with a mixture of fiat currencies and some decidedly unstable reserves, including unsecured deposits receivables, loans, and other crypto assets. Despite early promises to audit its holdings, the companies had never done so satisfactorily, and at least 29 of the arrangements it made with other parties “were not documented through any agreement or contract.”
CFTC found Tether violated the Commodity Exchange Act.
The CFTC’s order found Tether violated the Commodity Exchange Act (CEA) and ordered it to cease and desist from any further breaches of the Act and other CFTC regulations in the future. The regulator ordered the group consisting of Tether Holdings Limited, Tether Limited, Tether Operations Limited, and Tether International Limited to pay US41 million in civil fines after the parties agreed the decision would be final. Separately, it issued an order for iFinex, BFXNA Inc., and BFXWW Inc. (companies related to the Bitfinex trading exchange) to pay US1.5 million for engaging in “illegal, off-exchange retail commodity transactions in digital assets with U.S. persons” and not registering its activities with U.S. regulators as required by law.