Bitfinex and Tether are facing legal woes. The CFTC sent subpoenas to both on December 6th, 2017. Bitfinex and Tether are behind controversial USDT tokens. Tether is closely linked to Bitfinex and it was audited by Friedman LLP last month. Tether is supposed to be a cryptocurrency pegged to the US dollar. The idea came into the picture in 2015. It intends to be a stable currency just like the US dollar with the characteristics of a cryptocurrency.
Tether Prices
Consequently, the price of Tether should remain stable around $1 as it is backed by the USD. Therefore, if you want to sell Tether back to the company that created them, you will be able to claim an equal number of USD dollars. This characteristic prompted critics and users to file a request asking the company to prove its reserve. The Friedman LLP audit revealed that Bitfinex executives are also involved with Tether. A memorandum to Tether issued by Friedman LLP in September 2017 speaks about Tether’s holdings. It says that, as per the first quarter 2017, within ten months, the firm had about $442 million in reserves. Its assets are worth $2.3billion but the bank’s name was covert.
In response to the figures above, Nouriel Roubini an analyst and cryptocurrency critic said:
“Only a full audit can show whether they truly have $2.3billion of reserves backing all the tokens.”
Tether Spokesperson Response
A Tether spokesperson responded to the criticism on Monday,
“Given the excruciatingly detailed procedures Friedman was undertaking for the relatively simple balance sheet of Tether, it became clear that an audit would be unattainable in a reasonable timeframe,”
However, Tether and Bitfinex deny their business relationship; there is no evidence of that relationship in their respective websites or in their public records. They do share a spokesperson and a CEO at least. Ronn Torossian, a spokesman for both firms said in early December 2017 that “Jan Ludovicus van der Velde is the CEO of both”. Similarly, in the documents that the International Consortium of Investigative Journalist revealed, Phil Potter acts as Tether director and also Chief strategy officer at Bitfinex.
A look at the present cryptocurrency market
One can easily trade Tether on the exchange it is associated with, Bitfinex, which is also one of the largest cryptocurrency exchanges in the world. Its current daily volume is more than $20 million USD according to Coinmarketcap. Nevertheless, looking at regulatior declarations and audits, Tether is bearing the brunt of official inquiries so far, not Bitfinex. Every update on this dollar backed cryptocurrency is influencing bitcoin and cryptocurrency markets as a whole. Besides Tether, Bitfinex is upsetting the price of Bitcoin as well as other digital currencies. Concerning towards Bitfinex’s opaque trading practices, Sarit Markovich, professor at Northwestern University’s Kellogg School of Management said the following:
“If Bitfinex isn’t acting out of self-interest, it is in the exchange’s best interest to explain its actions fully: why new [tether] are being printed, what they’re backed up by, and the like. She added, “Vagueness raises justifiable suspicion, but only on the part of those who understand the market dynamics at play.”
When it comes to cryptocurrences, the US Commodity Future Trading Commission (CFTC) is now being more aggressive about fraud and money laundering cases. So far, procedural steps have prevented fraud indictments and prosecution against Tether. Other projects like MyBigCoin, CoinDropMarket and The Entrepreneurs Headquarters Limited are being indicted.
