Tether Under Fire: Scandals Plague World’s Most-Traded Cryptocurrency
Tether, the leading stablecoin, is facing new challenges. An article published by the Wall Street Journal on Friday alleges that the company relied on forged documents and shell corporations to gain access to the banking system.
The publication cites correspondence and records as evidence that Tether’s parent company went to great lengths to maintain connections to the traditional financial system and establish bank accounts.
One email cited by the WSJ stated that a prominent Chinese trader attempted to bypass the banking system by submitting fraudulent invoices and contracts for each deposit and withdrawal.
Stephen Moore, one of the owners of Tether Holdings Ltd., acknowledged this activity before opting to disassociate with the trader as it was deemed too dangerous.
Tether’s use of problematic third-party entities that possessed seized assets worth hundreds of millions of dollars and links to terrorist organizations is also highlighted in the WSJ article. Additionally, the US Justice Department is reportedly investigating the company.
Tether has responded to the allegations, stating that the report is “wholly inaccurate and misleading.” It also emphasized that Bitfinex and Tether uphold applicable legal requirements for Anti-Money Laundering, Know Your Customer, and Counter-Terrorist Financing.
Tether’s business is centered around the issuance of USDT, a stablecoin that ranks third globally in terms of market capitalization at $71 billion. As a stablecoin, USDT is backed by a stable asset like the US dollar, making it a popular cryptocurrency to quickly enter and exit trades without using traditional banks or fiat currency.
Tether is especially popular in markets where dollars are restricted or unavailable, as well as in decentralized finance (DeFi), which aims to disintermediate banks.
USDT and other stablecoins simplify the process of converting cryptocurrencies into traditional currencies on an exchange. Despite its success, Tether has been the subject of controversy, having not yet provided proof of the US dollar backing of its stablecoin and lacking independent audits.
In 2021, Tether agreed to stop operating in New York after an investigation by the New York Attorney General found that it had made false claims about the stablecoin’s backing.