The US Department of Justice is investigating Tether stablecoin executives for alleged criminal activities involving bank fraud that occurred during the early stages of the company which launched the popular cryptocurrency in 2014.
Bloomberg News reported Monday that the investigation will specifically focus on Tether’s events from several years ago to establish whether the company concealed crypto-related transactions from several banks.
The report adds that three executives had direct knowledge of the nature of the transactions and could have chosen to disclose such details about the transactions. Each of the executives has received a notification from the Department of Justice notifying them of the investigation, the report said.
Tether’s Reserves Woes
Tether (USDT) is the leading stablecoin and whose tokens are issued by Tether Limited, a subsidiary of Bitfinex crypto exchange.
Initially, Tether was assumed to be pegged to the dollar at 1:1 ratio until 2019 when the company said that each token was backed by other underlying assets including cash and cash equivalents, secured loans, corporate bonds, funds, and precious metals, and other investments such as digital tokens. Up to 75% of the assets are cash and cash equivalents while 25% are secured loans.
It also has a market capitalization of $62.5 billion, a circulating supply of 61.9 billion USDT, and a total supply of 62 billion USDT. The close relationship that exists between tether and bitcoin in the cryptocurrency market has in the past played a significant role in the price action of BTC.
In March 2021, another investigation into Tether’s reserves by the New York Attorney General’s Office ended with Tether Limited admitting to wrongdoing and agreeing to settle. At the time, Tether’s General Counsel said that the stablecoin has always been fully backed.
Several analysts are already speculating that if the Tether goes down as a result of the investigation, the move could boost bitcoin’s price further from its recent spike close to $40k. CivicKey’s blockchain startup CEO Vinny Lingham said:
“$60bn+ of Tether going into Bitcoin could be as crazy to watch as the MTGox spike in 2013.”
Allegations are Baseless, Tether Responds
In response to the DoJ, Tether has said through a spokesman that Bloomberg’s report is stale news and an attempt to increase traffic to its website, as BTC Times reports.
“[The Bloomberg report] is based on unnamed sources and years-old allegations, patently designed to generate clicks. This article follows a pattern of repackaging stale claims as ‘news.’”
Tether further pointed out that it always participates in routine dialogues with law enforcement agencies as part of its commitment to cooperation, accountability, and transparency.
“It is business as usual as Tether, and we remain focused on how to best serve the needs of our customers.”