Hy folks!
In this article, we'll talk about
- How Tether was charged in 2019
- A post against the company is published on Medium
- Deputy CEO Pepin's response
It has been a long time since Tether has been seen as a company characterized by a certain lack of transparency. In fact, Tether Ltd. aka the company that owns Tether (USDT) was sued in 2019 by its own lawyer who claimed that despite its large market capitalization, the coin had a FIAT cash reserve equivalent to only 74% of its total value.
This means that every single virtual dollar (USDT) was only 74% covered by the funds held by the company. However, today Gregory Pepin wanted to clarify the situation a bit.
The 2019 Charge
Some documents published by Tether's lawyers in April 2019, in particular by Zoe Philips, had shown how the company had enough cash to cover only 74% of all issued coins available on the market.
This went against all the promises made by the company's executives, who have always stressed that each USDT was entirely backed by cash.
In this case, however, the New York Attorney General's Office, involved in the case against the company, accused Tether Ltd. of using part of the reserves to solve problems related to the Bitfinex exchange, whose CEO is the same.
During the investigation, it was also stated by Philips himself that the funds were invested, and that there was no need to worry as 1 USDT is traded at a figure very close to 1 dollar.
The Bit Short: Inside Crypto’s Doomsday Machine
USDT's market capitalization has grown from $4 billion to an impressive $24 billion in just under a year. In fact, according to what Tether publishes on its website, reserves include traditional currency and FIAT cash equivalents and, in some cases, may include other assets and credits from loans made by Tether Ltd. to third parties, which may include affiliated entities.
Despite these very reassuring claims however, several doubts have arisen since an anonymous post on Medium titled "The Bit Short: Inside Crypto's Doomsday Machine" cited the difference between the amount of Tether (USDT) issued between January and September 2020, and the funds held at domestic banks based in the Bahamas.
In the post, this was seen as damning evidence of Tether's lack of reserves. In addition, the anonymous post also showed data from central banks that demonstrated, precisely, the discrepancy.
The latest episode of the Unchained Podcast
Obviously, after an ongoing trial, yet another post accusing the company of not having enough reserve funds available has made some of the individuals at the top of the company slightly annoyed.
In fact, in a podcast conducted on Friday by Greogry Pepin, deputy CEO of Deltec Bank, i.e. the official bank of Tether Ltd. it was stated how each Tether (USDT) is backed by 100% FIAT cash equivalent reserves. Moreover, the deputy CEO confirmed that the reserves are even much more than the coins that are in circulation.
This is definitely a statement that greatly reduces the many fears that many people have about holding a stablecoin like the USDT, which despite its stability in the market, is managed by a company that has been accused of not keeping its promises over time.
In addition, Pepin responded to the anonymous author of the post that the company cannot accept local customers, as they are not authorized to hold Bahamian national dollars, which is why the document is practically useless. In addition, the deputy CEO cleared up some doubts regarding the bank's recent disclosure about bitcoin purchases for customers, confirming that neither Tether nor the bank is involved in this matter.
Conclusions
There are many cases, unfortunately, in which very serious and stable companies like Tether Ltd. are sued in relation to lack of transparency or operations considered illegal.
An example is the case of Ripple (XRP), recently accused of having sold financial assets without ever having registered the sales.
Unfortunately, it is not always easy to manage companies like these, which operate on the market 24 hours a day in a continuous manner, and it is very easy to make "stupid" mistakes that can turn into real legal issues.
Of course, anyone who invests in financial assets knows very well that risks are always around the corner, even if it's a stablecoin like Tether (USDT).
As I always recommend, all you can do is keep up to date to avoid having your portfolio balance magically drop to zero.
This article was translated manually and with a translator software from my original post on theledger.it, so I'll attach the link to my article here.
If you want to improve your Italian and learn more about crypto arguments, just check out our blog by clicking on the link below :)
Learn More
- https://theledger.it/news/regolamentazioni/stablecoin-e-interpretive-letter-1174-le-banche-americane-potranno-utilizzare-la-blockchain-per-le-transazioni/
- https://theledger.it/recensioni/curve-recensione-dellexchange-per-stable-coins/
- https://theledger.it/news/finanza/ripple-xrp-e-kraken-exchange-stop-alle-operazioni-per-gli-utenti-statunitensi/
Bibliography
- https://decrypt.co/55042/tether-is-fully-backed-by-us-dollars-says-deltec-deputy-ceo
- https://it.cointelegraph.com/news/fractional-reserve-stablecoin-tether-only-74-backed-by-fiat-currency-say-lawyers
- https://www.coindesk.com/tether-bank-deltec-stablecoin-reserves
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