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Tether To Pay $42.5M Fines Over Claims That USDT Is Backed By A Dollar Each

Tether and Bitfinex – the issuers of the highly popular cryptocurrency USDT stablecoin have agreed to pay $42.5M in fines to the Commodity Futures Trading Commission (CFTC) for false claims that the Tether Stablecoin was fully backed by US Dollars and over execution of illegal transactions while operating Bitfinex cryptocurrency trading platform, a CFTC press release on Oct 15 said. The stablecoin Tether – the largest by numbers issued and usage has long been criticized for the claim that it’s USDT is backed 1:1 by the United States Dollars (USD).

The Commodity Futures Trading Commission (CFTC) is an American agency responsible for regulating U.S. derivatives markets including futures, swaps and certain options. This is the first that the CFTC has applied the definition of commodities to include stablecoins. However, the Commissioner reiterated that the agency doesn’t regulate stablecoins and public shouldn’t have any false sense of comfort that CFTC is overseeing the stablecoin business.

The settlement with the Tether respondents finds that there were misrepresentations regarding the assets backing tether, specifically that the USDt tokens were backed 1-to-1 by US dollars.  The evidence establishes that this assurance provided to tether customers was not 100% true, 100% of the time.  When reviewing this record, it is clear to me that wrongdoing occurred, and that someone should be held accountable.  For all of these reasons, I concur in the Commission’s acceptance of the Tether respondents’ offers of settlement.

Commissioner Dawn D. Stump Over CFTC Decision

CFTC has fined Tether for “for making untrue or misleading statements and omissions of material fact in connection with the U.S. dollar tether token (USDT) stablecoin” and Bitfinex for finding that it “engaged in illegal, off-exchange retail commodity transactions in digital assets with U.S persons on the Bitfinex trading platform and operated as a futures commission merchant (FCM) without registering as required”.

Tether, since it’s inception in 2014, has claimed that it’s USDT tokens are backed 1:1 by the USD and Euros. But, the company misrepresented these claims from Jun 01, 2016 to Feb 25, 2019 by changing the wording to “equivalent amount of corresponding fiat currency” held by Tether and “safely deposited” in Tether’s bank accounts. CFTC found that these claims weren’t true and Tether wasn’t “fully backed” for most of the time.

The agency also noted in it’s verdict that Tether failed to disclose that its reserves included unsecured receivable and non-fiat assets and that the blockchain company failed to carry out routine professional audits of its reserves backing. CFTC press release mentions that Tether held FIAT reserves for only 27.6% of the days in a 26 month sample time from 2016-2018 and the company relied on unregulated entities and shady third parties to hold funds, instead of holding them itself.

Tether hasn’t concluded any proper audit of its reserves until now and the last audit was found to be manipulated by the CFTC as the company selected the date in advance and transferred funds beforehand to paint a false picture of 1:1 backing. While the matter is closed for now with the CFTC, Tether’s reputation as a credible and reliable stablecoin issuer has come under fire. The red flags that were previously raised by the critics have basically been confirmed.

tether cftc fines
tether cftc fines© Cryptoticker

The post Tether To Pay $42.5M Fines Over Claims That USDT Is Backed By A Dollar Each appeared first on CryptoTicker.

Tether To Pay $42.5M Fines Over Claims That USDT Is Backed By A Dollar Each

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