Consumer advocacy group Consumers’ Research has released a report accusing Tether, the issuer of the USDT stablecoin, of being opaque and not fully auditing its dollar reserves.
Tether has been accused of being non-transparent (again)
Consumer Research Analysts He said The issuer of USDT has yet to conduct an audit of its reserves, despite promising to do so since 2017. Additionally, the stablecoin has a stability rating of “4 out of 5” on S&P Global Ratings, with “5” being the worst.
The report includes a letter to governors across the US, which addresses Tether’s mysterious activities. In addition to the open letter, Consumers’ Research has released a dedicated resource detailing its allegations.
As such, the organization accuses Tether of repeatedly promising to thoroughly audit its reserves. Despite the promises, the project has never provided a full report from a respected auditing firm. They also see similarities to the situation of FTX and Alameda Research. Tether’s lack of transparency is reminiscent of the circumstances that led to the collapse of FTX.
“As you will see in the attached consumer warning, Tether is suffering from many of the same problems that FTX and Celsius faced before their collapse — potentially costing consumers billions of dollars using deceptive and misleading marketing tactics that contradict the truth.”
Finally, the company is blamed for dealing with unscrupulous partners. Analysts also believe that the company failed to prevent the use of USDT to circumvent international sanctions and other illegal activities.
Meanwhile, the first phase of consumer research against Tether was launched in June. The company accused the issuer of the USDT stablecoin of having ties to Russian and Chinese authorities, terrorist organizations, and drug cartels.
The Hidden Dollar for Sanctioned Countries
Earlier, Wall Street Journal (WSJ) reporters said, He said USDT has become a “stealth dollar” for countries like Venezuela and Russia, ensuring the freedom of capital transit abroad.
The authors of the article point out the fact that USDT threatens the financial system and national security of the United States because it remains unregulated. The Wall Street Journal claims that the asset’s trading volume in 2023 has surpassed the same indicator for the Visa payment system.
Additionally, stablecoin issuer Tether’s profits during the same period amounted to $6.2 billion, which is more than the profits of the world’s largest exchange-traded fund provider, BlackRock. The Wall Street Journal confirmed that the company was able to achieve these numbers with a staff of 100 people.
The Wall Street Journal singled out Venezuela and Russia, noting that USDT is widely used in these countries to circumvent sanctions. In the first case, state-owned Petroleos de Venezuela uses a stablecoin to pay for oil supplies.
“Oligarchs and arms dealers use Tether abroad to buy real estate and pay suppliers for sanctioned goods. Venezuela’s sanctioned state oil company receives Tether for shipments. Drug cartels, fraud gangs, and terrorist groups like Hamas use it to launder income.”
The authors of the article also noted the rapid expansion of USDT in the global market. In particular, Tether’s efforts to promote itself in Georgia were highlighted here.
The journalists quoted Eralp Hatipoglu, CEO of the company’s local partner CityPay.io, as saying that the institution provides international payments in USDT worth about $50 million per month. According to him, this is due to the pressure exerted by the United States on the global banking system.
Hatipoglu also added that the service carefully vetted participants in the transactions but did not provide evidence.
Claims against Tether are gaining momentum
Earlier in August, bankrupt Celsius Network accused Tether of misappropriating assets and violating the terms of the agreement.
Court documents indicate that in 2020, Celsius Network entered into an agreement with Tether. Under the agreement, the company received borrowed funds in USDT stablecoins. In response, the platform sent Tether 39,542 Bitcoin (BTC) as collateral.
Celsius Network representatives claim that Tether hastily liquidated a large number of bitcoins in 2022, violating the terms of the contract and leading to the company’s bankruptcy.
Tether CEO Paolo Ardoino responded that Celsius Network decided not to provide additional collateral and instructed Tether to liquidate the bitcoins to close the position.
There is another no less significant case in the history of the issuing company, which ended relatively recently – a lawsuit against Tether and Bitfinex. The scandal erupted in 2019. Representatives of Tether and the Bitfinex cryptocurrency exchange initially hid the close relationship between the companies. For a long time, the parties did not declare that both organizations belong to the same parent structure – iFinex Inc. The presence of joint directors was also hidden. This gave rise to numerous suspicions of a conflict of interest.
It was later revealed that Bitfinex had used Tether reserves to cover its losses. There were also allegations of market manipulation. The New York State Attorney General’s Office revealed details of the illegal operations. The companies were later forced to admit their involvement.
The case raised doubts about the level of support for Tether. Later, Tether and Bitfinex settled the case, paying a fine of $18.5 million. The companies also agreed to report their reserves regularly.
Is Tether really bad?
Tether Limited Inc. has been facing fraud accusations almost since its inception. The history of the company issuing USDT is full of dark pages. However, based on their actions, the company’s representatives are ready to take responsibility for mistakes and fight for the development of the project.
The allegations of the Consumer Research Foundation and the Wall Street Journal are not without merit. Many of them can be resolved through independent auditing.
The claims against Tether haven’t changed much over the years. Despite the pressure, the project continues to live and evolve. Tether may be able to weather subsequent investigations with negative results, which could in turn be challenged.