Consumer advocacy group Consumers Research has released a report accusing Tether, the issuer of the USDT stablecoin, of being opaque and not conducting a full audit of its dollar reserves.
Teaser accused of being opaque (again)
Analysts at Consumers’ Research said USDT issuers have not yet conducted an audit of their reserves, despite promises to do so starting in 2017. Furthermore, the stablecoin has received a stability rating of “4 out of 5” by S&P Global Ratings. Here “5” is the worst.
The report also includes letters to governors across the U.S. reporting on Tether’s opaque activities. In addition to the open letter, Consumers Research has launched a special resource with a detailed explanation of its claims.
The organization therefore accuses Tether of repeatedly promising to thoroughly audit its reserves. Despite promises, the project has never provided a full report from a reputable auditing firm. They also noticed similarities between the FTX and Alameda Research situations. Tether’s lack of transparency is reminiscent of the situation that led to the collapse of FTX.
“As outlined in the attached consumer warning, Tether suffers from many of the same problems that FTX and Celsius had before their bankruptcy, with deceptive and misleading marketing strategies that are inconsistent with the truth. could cost consumers billions of dollars.”
Finally, the company has been accused of doing business with unscrupulous partners. Analysts also believe that the company failed to prevent USDT from being used to circumvent international sanctions and other illegal activities.
At the same time, the first phase of consumer research into Tether began in June. The company accused the issuer of the USDT stablecoin of having ties to Russian and Chinese authorities, terrorist organizations, and drug cartels.
Secret dollar for sanctioned countries
Earlier, Wall Street Journal reporters said USDT has become a “secret dollar” for countries such as Venezuela and Russia, ensuring the free movement of capital abroad. said.
The authors of the article cited the fact that USDT is unregulated and therefore threatens the US financial system and national security. WSJ claims that the asset’s trading volume in 2023 exceeded the same index for the Visa payment system.
Furthermore, stablecoin issuer Tether’s profit for the period reached $6.2 billion, surpassing that of BlackRock, the world’s largest ETF provider. WSJ highlighted that the company was able to achieve these numbers with a staff of 100 people.
WSJ singled out Venezuela and Russia, noting that USDT is widely used in these countries to circumvent sanctions. In the first case, the state-owned company Petroleos de Venezuela uses stablecoins to pay for oil supplies.
“Russian oligarchs and arms dealers are shipping Tethers abroad to buy real estate and pay suppliers of sanctioned goods. drug cartels, fraudsters, and terrorist organizations like Hamas use it to launder their proceeds.
The authors of the article also pointed out that USDT is rapidly expanding within the global market. In particular, Tether’s efforts to promote itself in Georgia were highlighted.
Journalists quoted Elalup Hatipoglu, CEO of the company’s local partner CityPay.io Services, as saying that the organization provides international payments in USDT worth around $50 million each month. . He said this is due to the pressure the US is putting on the global banking system.
Hatipoglu also said the service carefully checked trading participants but did not provide any evidence.
Allegations against Tether gain momentum
In early August, bankrupt Celsius Network accused Tether of misappropriating assets and violating the terms of its contract.
According to court documents, Celsius Network signed a deal with Tether in 2020. Under this agreement, the company received borrowed funds in the USDT stablecoin. In response, the platform sent Tether 39,542 Bitcoins (BTC) as collateral.
Representatives for Celsius Network claim that Tether’s hasty liquidation of large amounts of Bitcoin in 2022 violated the terms of the agreement and led to the company’s bankruptcy.
Tether CEO Paolo Ardoino responded that Celsius Network has decided not to provide additional collateral and has instructed Tether to liquidate the Bitcoin to unwind the position.
There is another similarly resonant case in the publisher’s history that ended relatively recently. It’s a lawsuit against Tether and Bitfinex. This scandal broke in 2019. Representatives from Tether and cryptocurrency exchange Bitfinex initially concealed the close relationship between the two companies. For a long time, the parties did not advertise that their organizations were part of the same parent organization, iFinex Inc. The existence of a common manager was also hidden. This gave rise to a number of alleged conflicts of interest.
It was later revealed that Bitfinex used Tether’s reserves to cover its losses. There were also allegations of market manipulation. The New York State Attorney General’s Office released details of the illegal operation. Both companies were then forced to acknowledge the relationship.
The incident raised questions about how well-backed Tether is. Tether and Bitfinex later settled and paid a fine of $18.5 million. The companies also agreed to provide regular reports on reserves.
Is tether really bad?
Tether Limited Inc. has been exposed to fraud charges almost since its inception. The history of the USDT publisher has a truly dark page. However, judging by their actions, representatives of the company are ready to take responsibility for the mistake and fight for the development of the project.
Consumers’ Research and The Wall Street Journal’s claims are not without merit. Many of them could be resolved by an independent audit.
The claims against Tether have changed little over the years. Despite the pressures, the project continues to survive and develop. Tether could ignore subsequent research and draw negative conclusions, which could call into question its validity.
