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Tether

U.S Judge Orders Tether To Produce Financial Records Proving USDT’s Backing

Kent Tenix
by Kent Tenix
2 years ago
·
Posted in Tether (USDT)
Trusted Editorial content, reviewed by leading industry experts and seasoned editors. Ad Disclosure

Stablecoin issuer Tether has recieved a court order to produce financial records that prove the backings of its USDT. The Judge at Northern District Court New York, Katherine Polk Failla, issued the order for Tether on Tuesday upon the plaintiffs’ request to prove its reserves. The latest order for Tether comes as part of a lawsuit filed in 2019 by a group of traders against iFinex, the parent company of Tether and Bitifinex exchange.

The case involves a research report of 2018 by the University of Texas. Experts found that Tether’s sister company Bitfinex purchased Bitcoin with unbacked USDTs to pump BTC price intentionally. And it resulted in the crash of over 1 trillion in the market.

Related Reading: Arbitrum Pays Hacker A Hefty Reward For Identifying A Bug

After a long 22 months of investigation, the lawsuit ended up with a settlement of $18.5 million. The New York Attorney General (NYAG) stopped investigating Bitifinex and Tether in February 2021, with companies agreeing to cut their services to New Yorkers.

Additionally, Attorney General found that iFinex mixed up the company’s and users’ funds in order to obstruct the losses of $850 million it faced due to a lawsuit against its partner payment channel Crypto Capital Corp. 

Understandably, it indicates Tether’s USDT was not backed with 100% reserves for a time-space around November 2018, NYAG said. While the company claimed its stablecoin, USDT, is always backed 1:1 with the U.S. dollar. Hence, Tether is liable to publish a quarterly report of its backing assets as part of the settlement. 

USDTUSD
USDT’s price is currently trading below $1. | Source: USDTUSD price chart from TradingView.com

Tether Intends To Keep Its Reserves’ Details Secret

Though Tether attaches documents on its website revealing its reserve, the report does not provide an in-depth picture of its backing assets.

That’s why Judge now ordered the defendant company to release the information of its “general ledgers, balance sheets, income statements, cash-flow statements, and profit and loss statements (…) as they relate to the backing of USDT (financial records RFPs [requests for proposal]) and crypto commodities transactions (transactions RFPs).” 

The court order also requires the firm to provide details of its accounts on Poloniex, Bitifinex, and Bittrex. 

The lawyers representing Tether attempted to overturn Judge’s order, calling it “unduly burdensome.” In addition, they claimed that revealing the composition of its reserves would be detrimental to its business.

Defendants added during the court ruling;

Plaintiffs offer no justification for such extraordinary requests, merely stating that they must assess whether the transactions were strategically timed to inflate the market.

Related Reading: Kraken CEO Jesse Powell To Step Down, COO To Take His Place

But Failla noted that the documents the plaintiffs seek are undeniably important in determining USDT’s backing with U.S. dollars. Accordingly, the Judge affirmed her decision by adding:

Plaintiffs plainly explain why they need this information: to asses the backing of USDT with U.S. dollars. (…) The documents sought in the transactions RFPs appear to go to one of plaintiffs’ core allegations: that the B/T Defendants engaged in crypto commodities transactions using unbacked USDT.

Featured image from Pixabay and chart from TradingView.com
Editorial Process for bitcoinist is centered on delivering thoroughly researched, accurate, and unbiased content. We uphold strict sourcing standards, and each page undergoes diligent review by our team of top technology experts and seasoned editors. This process ensures the integrity, relevance, and value of our content for our readers.
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Kent Tenix

Kent Tenix

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Kent is a talented freelance writer and journalist who creates insightful and thought-provoking content. With over 5 years of experience, she has honed her skills and established herself as an expert in her field. Kent is especially passionate about in-depth reporting and investigative journalism. She thoroughly researches every topic and story she covers to provide readers with comprehensive information and perceptive analysis. Whether she's reporting on politics, business, technology, or culture, Kent prioritizes accuracy, nuance, and integrity. Her goal with every piece is to inform readers and inspire meaningful conversations and positive change. Kent enjoys traveling, photography, and spending time with her family when she's not tirelessly conducting interviews or poring over data. She hopes to continue using her writing to enlighten and engage audiences on issues that matter.

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