Tether chiefs face potential bank fraud charges following regulatory crackdown

US criminal probe into actions of Tether executives query potential bank fraud charge

A probe into the actions of Tether executives over the past year has begun to query whether there are sufficient grounds for banking fraud charges to be brought forward.

In an investigation with potentially massive consequences for the crypto industry, the United States Department of Justice (DoJ) has begun unpacking the past actions of key Tether executive figures to see whether they knowingly concealed the crypto-linked nature of numerous transactions from banks.

Tether (USDT) is the market-leading stablecoin, used widely by many traders as a means to buy-and-sell Bitcoin (BTC) free from concerns about uncontrolled volatility.

The significance of the Tether ecosystem cannot be understated. More than half of all BTC trades utilise USDT, and the Tether market cap sits at $61B.

“Tether routinely has open dialogue with law enforcement agencies, including the DOJ, as part of our commitment to cooperation and transparency,” Tether said in a statement relating to the accusations.

Regulators first smelled blood with Tether in 2018, when suspicions emerged that USDT had been used to illegally pump the price of BTC during the 2017 bull run.

The DoJ investigations have plagued USTD ever since. However, this latest news suggests the attention of prosecutors has shifted from market manipulation to fraudulent banking practices – a significant pivot from the USDT asset to Tether as a company.

Earlier this year, Bitfinex and a syndicate of Tether affiliates settled a series of claims that the firms lied about the underpinning of USDT with fiat USD, after it emerged the companies didn’t even have access to traditional banking in 2017.

NY Attorney General Letitia James ordered a monetary settlement of $18.5m, to which the firms agreed.

“Bitfinex and Tether recklessly and unlawfully covered-up massive financial losses to keep their scheme going and protect their bottom lines,” said James.

“Tether’s claims that its virtual currency was fully backed by US dollars at all times was a lie.

“These companies obscured the true risk investors faced and were operated by unlicensed and unregulated individuals and entities dealing in the darkest corners of the financial system.”

USDT and stablecoins across the board are seen as a substantial threat by global regulators, these claims of underpinning with fiat juxtaposed with their sheer market cap drive fears that a run on the stablecoin could lead to a run on the underlying fiat currency.

This could lead to a complete destabilisation of credit markets.

Treasury Secretary Janet Yellen has warned that global regulators must “act quickly” in considering new rules and regulations to offset the risks posed by stablecoins – Central Bank Digital Currencies offer a potential solution.

More crypto news and information

If you want to find out more information about Bitcoin or crypto regulation in general, then use the search box at the top of this page. Here’s an article to get you started.

As with any investment, it pays to do some homework before you part with your money. The prices of cryptocurrencies are volatile and go up and down quickly. This page is not recommending a particular currency or whether you should invest or not.

Disclaimer: The views and opinions expressed by the author should not be considered as financial advice.

Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.

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