The Commodities Futures Trading Commission (CFTC) is ordering the entities behind the Tether stablecoin (USDT) to pay $41 million in fines.
According to a new press release, the CFTC charged Tether Holdings Limited, Tether Limited, Tether Operations Limited, and Tether International Limited for making “untrue or misleading statements and omissions of material” related to USDT.
USDT is pegged to the US dollar, and Tether claims it is completely backed by corresponding fiat assets, including the dollar and the euro.
According to the statement, the regulator examined 26 months between 2016 to 2018 and found that Tether only had sufficient reserves to fully back USDT on 27.6% of the examined days.
“In fact Tether reserves were not ‘fully-backed’ the majority of the time. The order further finds that Tether failed to disclose that it included unsecured receivables and non-fiat assets in its reserves, and that Tether falsely represented that it would undergo routine, professional audits to demonstrate that it maintained ‘100% reserves at all times’ even though Tether reserves were not audited.”
The CFTC also says Tether dipped its reserve funds into the operational and customer funds of crypto exchange Bitfinex.
“The order also finds that, instead of holding all USDT token reserves in U.S. dollars as represented, Tether relied upon unregulated entities and certain third-parties to hold funds comprising the reserves; comingled reserve funds with Bitfinex’s operational and customer funds; and held reserves in non-fiat financial products. The order further finds that Tether and Bitfinex’s combined assets included funds held by third-parties, including at least 29 arrangements that were not documented through any agreement or contract, and that Tether transferred Tether reserve funds to Bitfinex, including when Bitfinex needed help responding to a ‘liquidity crisis.’”
Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
Featured Image: Shutterstock/klyaksun/WhiteBarbie