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Tether Execs Reportedly Facing DOJ Probe For Bank Fraud

Tether Execs Reportedly Facing DOJ Probe For Bank Fraud

Tether, the firm behind the world’s third largest cryptocurrency by market capitalization, reportedly has its executives facing criminal investigation for alleged bank fraud, according to an initial report by Bloomberg.

Led by the U.S. Justice Department, the investigation is said to be focused on whether any misconduct was done by some top-ranking tether executives, with the possible scenario of bank fraud leading to a criminal case that would hold the firm responsible.

The subject of the current probe highlights the possibility of Tether’s stablecoin being used to obscure transactions “tied to money laundering and other misconduct,” reports Bloomberg. 

When Tether was first launched in 2014, it provided a disruptive solution to the friction between the crypto market at the time and traditional financial institutions which have historically refused to provide services to crypto exchanges and traders, citing concerns of possible criminal relationships with the funds being transferred and traded.

With looming regulatory scrutiny on the firm, federal prosecutors are attempting to find evidence that Tether has concealed critical information from banks on transactions that were linked with crypto. According to Bloomberg’s initial report, there were “three people with direct knowledge of the matter” that first disclosed the probe’s highlights to the publication. Bloomberg, however, declined to reveal its sources.

In a response note, Tether said:

“[...] Bloomberg published an article based on unnamed sources and years-old allegations, patently designed to generate clicks. This article follows a pattern of repackaging stale claims as “news.” The continued efforts to discredit Tether will not change our determination to remain leaders in the community.”

Tether has been the subject of law enforcement agencies’ investigations for the past couple of years. The central issue around these investigations is Tether’s claim that the USDT stablecoin is backed by the U.S. dollar on a one-to-one ratio, meaning that all tokens issued have backing in the form of bonds, precious metals, and commercial paper.

While Tether has gone to lengths to prove this claim, regulators remain wary that there might be unintended effects to traditional, short-term credit markets, leading to the destabilization of the global monetary system. Despite the increasing pressure, Tether maintains that it is fully compliant with regulatory frameworks and policies:

“Tether routinely has open dialogue with law enforcement agencies, including the U.S. Department of Justice, as part of our commitment to cooperation, transparency, and accountability. We are proud of our role as industry leaders in promoting cooperation between industry and government authorities in the U.S. and around the world.”

Earlier this year, Tether’s affiliate crypto exchange, Bitfinex, among other affiliate entities, have agreed to settle $18.5 million with the New York Attorney General’s Office, professing no wrongdoing under the settlement's terms.

Tether’s market capitalization is currently ranked third on CoinMarketCap, with over $61 billion worth of Tether’s USDT stablecoin running through the crypto market. While the token only ranks third by market capitalization, it surpasses even the combined 24-hour trading volume of both Bitcoin ($41 billion) and Ethereum ($25 billion). USDT’s daily trading volume is roughly $78 billion, a proof of the kind of impact and influence that it has had in the crypto space.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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