New charges — new problems: Will Tether survive them?

As a seasoned researcher who has witnessed the rise and fall of numerous digital assets, I find myself deeply concerned about the ongoing allegations against Tether (USDT). The consistent accusations of opaqueness, lack of transparency, and potential ties to illegal activities are reminiscent of a recurring nightmare in the crypto world.


A watchdog organization called Consumers’ Research has published a critique charging Tether, the company behind the USDT stablecoin, with being secretive and failing to complete a comprehensive review of their dollar holdings.

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Teather is accused of being non-transparent (again)

Analysts from Consumers’ Research have noted that the entity behind USDT has not completed an audit of its reserves to date, despite having pledged to do so since 2017. Interestingly, this stablecoin received a “4 out of 5” rating in terms of stability from S&P Global, with “1” being the most stable and “5” the least stable.

The report includes a letter to the governors of all U.S. states, which reports on Tether’s opaque activities. In addition to the open letter, Consumers’ Research has launched a special resource with a detailed description of its claims.

Consequently, the entity alleges that Tether has repeatedly promised to conduct an in-depth audit of its reserves, yet no comprehensive report from a trusted auditing firm has been presented. Moreover, they observe similarities with the case involving FTX and Alameda Research. The lack of transparency on Tether’s part echoes the situation that ultimately led to the downfall of FTX.

The enclosed Consumer Warning highlights similar problems experienced by Tether as were seen in the cases of FTX and Celsius prior to their downfall, which could result in massive financial losses for consumers. These issues stem from deceptive and misleading marketing strategies that contradict reality.

Ultimately, there are accusations that the company has been associating with questionable business partners. Additionally, analysts suspect that the company’s oversight allowed USDT to be utilized in bypassing international sanctions and illicit actions.

Concurrently, the initial phase of a Consumers’ Research campaign targeting Tether began in June. The firm leveled allegations against the issuer of the USDT stablecoin, claiming connections with Russian, Chinese government entities, terrorist groups, and drug trafficking networks.

Incognito dollar for sanctioned countries

Previously, WSJ reporters stated that USDT functions as a sort of “hidden U.S. dollar” in nations like Venezuela and Russia, facilitating seamless transfer of funds overseas.

The authors of this piece argue that USDT poses a risk to both the U.S. financial infrastructure and national security, given its lack of regulation. The Wall Street Journal asserts that in 2023, the trading volume of this asset surpassed that of the Visa payment network.

Furthermore, it’s worth noting that Tether, the stablecoin issuer, earned a staggering $6.2 billion in profits during the same timeframe – surpassing the world’s leading ETF provider, BlackRock. The Wall Street Journal highlighted this impressive feat, achieved by just 100 employees within the company.

The Wall Street Journal highlighted Venezuela and Russia as countries where Tether (USDT) is commonly employed to bypass sanctions. In Venezuela’s instance, the government-run oil company, Petroleos de Venezuela, employs a stablecoin for settling oil transactions.

As a researcher delving into the intricacies of global financial transactions, I’ve uncovered some striking patterns. Tether, a cryptocurrency, seems to be a preferred method for certain entities to navigate international economic waters. Russian oligarchs and arms dealers, under sanctions, often utilize Tether when making overseas property purchases or settling bills for prohibited goods. Similarly, Venezuela’s sanctioned state oil firm accepts Tether payments for their cargoes. Furthermore, it appears that criminal networks, including drug cartels, fraudulent organizations, and groups like Hamas, leverage Tether for money laundering purposes.

The authors of this piece additionally underscored the swift growth of USDT on a worldwide scale. Notably, they emphasized Tether’s marketing initiatives specifically in Georgia.

Eralp Hatipoglu, CEO of CityPay.io, the local partner company, is reported as stating that their organization processes approximately $50 million in international payments each month in USDT. He attributes this high volume to the influence of the United States on the worldwide banking network.

Hatipoglu further explained that they thoroughly scrutinized the individuals involved in each transaction, yet failed to present any concrete proof.

Claims against Tether are gaining momentum

In August, the now-bankrupt Celsius Network alleged that Tether had improperly used assets and breached the terms of their contract.

2020 saw Celsius Network entering a contract with Tether. According to this deal, they obtained loans in USDT digital coins. As a result, the Celsius Network transferred 39,542 Bitcoin (BTC) as security for these borrowed funds.

According to Celsius Network’s statements, Tether allegedly quickly sold off a substantial amount of Bitcoins in 2022, which was deemed as a breach of contract and ultimately contributed to Tether’s financial collapse.

As an analyst, I can express this statement in a more conversational and first-person manner like so: When queried about the situation, Paolo Ardoino, Tether CEO, disclosed that Celsius Network opted against offering extra collateral and instead requested Tether to sell off bitcoins to settle the position.

In the past history of the issuer, there’s another instance that echoes strongly, and it concluded not long ago – a lawsuit involving Tether and Bitfinex. This controversy surfaced in 2019. Initially, representatives from Tether and the Bitfinex cryptocurrency exchange kept their close association secret. For quite some time, they failed to disclose that both entities fall under the same umbrella company – iFinex Inc. Additionally, they concealed the fact that they shared common management. This led to numerous questions about potential conflicts of interest.

It emerged later that Bitfinex had utilized Tether’s funds to offset its own losses, and there were accusations of market manipulation as well. These illicit activities were eventually exposed by the New York State Attorney General’s Office, leading the companies to acknowledge their involvement in these operations.

The situation cast some uncertainty over the extent to which Tether is secured. Later, Tether and Bitfinex resolved this issue by paying a penalty of $18.5 million. Additionally, they consented to regularly disclose information about their holdings.

Is Tether really that bad?

Tether Limited Inc., from nearly its inception, has been confronted with accusations of fraud. The background of USDT’s issuer certainly includes some questionable chapters. Yet, based on their behavior, it appears that the company’s leaders are willing to acknowledge mistakes and strive for the advancement of the project.

As a crypto investor, I find the assertions made by Consumers’ Research and The Wall Street Journal to be substantiated. It seems that many of these issues can be addressed through a thorough, third-party audit. This way, we can have a clearer understanding and ensure transparency in our investments.

Over the years, the allegations against Tether have remained fairly consistent. Regardless of the scrutiny, the project has managed to persist and progress. Tether might find a way to navigate through future probes resulting in unfavorable findings, and even these results could potentially be questioned.

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2024-09-13 19:12