Tether – dummy? History and results of the investigation

The New York State Attorney General's Office (NYAG) has been investigating Tether for 22 months.fiat currency and the use of coin issuance forcoverage of financial losses incurred in Bitfinex. While Tether and Bitfinex are subsidiaries of iFinex, the root of the problem lies with the third-party company Crypto Capital.

Tether is a stablecoin pegged at a 1:1 to the US dollar. To ensure the stability of the system, the company's bank accounts must contain the same volumes of fiat currency as the tokens on crypto-exchanges. In 2018, the regulator expressed doubts about the security of Tether with US dollars, and the prosecutor's check was provoked by a loan to Bitfinex in the amount of $ 850 million. It was suggested that the necessary coins were simply reprinted. The relationship between Tether and Bitfinex was never advertised, however, Bitfinex was the first to list the token, and the subsequent crisis with Crypto Capital revealed a direct connection between the two crypto companies.

With the growing turnover of the Bitfinex crypto exchangea large and reliable financial operator was needed, but in 2017, Wells Fargo bank refused to cooperate with it. Then management turned to Crypto Capital, based in Panama. Due to the complexity of working with established financial institutions, Binance, Kraken and EXMO have worked with Crypto Capital at one time. But it was Bitfinex that found itself hostage to the situation when, in 2018, Crypto Capital was accused of fraud and laundering drug cartel funds, and its accounts were seized in Poland, the USA and Portugal.

Since Crypto Capital was the main paymentan aggregator for Bitfinex, $ 850 million of the crypto exchange were reserved on its accounts. The seizure of the accounts caused an acute liquidity shortage and the fate of Bitfinex was in jeopardy. To avoid the risk of bankruptcy, Bitfinex took the missing funds from Tether, but did so in secrecy, prompting a new wave of accusations. Due to the intervention of the regulator, financial relations had to be documented. Subsequently, Bitfinex settled with Tether by holding an ICO with the release of the LEO token: in 10 days the exchange raised $ 1 billion. However, an investigation has already been launched.

For 22 months, the prosecutor's office conducted an investigation, it wasover 2.5 million documents were requested. The regulator's verdict: all charges are dropped from Tether and Bitfinex, as part of the settlement, the companies must pay $ 18.5 million and provide quarterly reports on the degree of provision of tokens with US dollars over the past two years. While the investigation was ongoing, Bitfinex changed its wording, adding cryptoassets and lending revenues to the "backing dollar reserves".

Following the news release, Bitcoin broke off its February correction with a 10% increase over the past 12 hours.

The importance of this news is difficult to overestimate,since the overwhelming majority of cryptocurrency exchanges settle in Tether, and its capitalization has grown from $ 1 billion in 2016 to the current $ 35 billion. The refusal of claims from the regulator will have a beneficial effect on the entire cryptocurrency market. However, the question of the degree of Tether's backing has not yet been settled.

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Analytical group StormGain

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