Last Updated: 6 March 2023
Update: Tether, the company behind the stablecoin USDT, has responded to an article by The Wall Street Journal alleging that the company and sister crypto exchange Bitfinex used forged documents and shady deals to gain access to its banking system. The WSJ reported on 3 March that it discovered via leaked documents and emails that entities linked to Tether and Bitfinex were falsifying invoices and transactions and hiding behind third parties to open bank accounts that might otherwise not have been accessible.
In a statement on 3 March, Tether called the report’s findings “old allegations” and “completely false and misleading”. The company added that Bitfinex and Tether have regulatory compliance programmes and meet applicable legal requirements on anti-money laundering, know your customer and terrorist financing.
The WSJ article outlines the shadowy trading practices of Tether and Bitfinex to stay connected to banks and other financial institutions that, if cut off, pose an “existential threat” to their business. A leaked email suggests that the company’s Chinese intermediaries tried to circumvent the banking system by providing fake sales invoices and contracts for every deposit and withdrawal. The report also claims that Tether and Bitfinex used various methods to circumvent controls that would have otherwise restricted them from financial institutions, and had links to a company that allegedly laundered money for a US-designated terrorist organisation.
I'm at the PlanB anniversary in #lugano
So much energy and people excited to talk about #Bitcoin
While I was on on stage I heard some clown honks, pretty sure was WSJ.
As always ton of misinformation and inaccuracies. Poor guys, must be difficult be them but need better media.
— Paolo Ardoino 🍐 (@paoloardoino) March 3, 2023
These kinds of reports are not new around Tether. In fact, the largest stablecoin has been under fire since its inception.
A new report from The Wall Street Journal claims that Tether, the company behind USDT stablecoin, used fake documents and shadowy companies to give its parent company access to its banking system.
The article quotes emails and documents showing that the company had to jump through several hoops to stay connected to the traditional financial system. This way, Tether could continue to open bank accounts.
USDT is the most popular currency to trade with in the world. The stablecoin accounts for the largest trading volume on most major crypto exchanges. At the time of writing, there is more than $71 billion of Tether in circulation. People use it to get in and out of trades quickly without using a traditional bank or fiat currency. It is faster to use USDT than a traditional bank transaction with the dollar.
The WSJ report also alleges that Tether has used problematic third parties that used “hundreds of millions of dollars in seized assets and connections to a designated terrorist organisation”. It added that the US Department of Justice is currently investigating Tether.
Tether denies the allegations and says the report is “completely inaccurate and misleading”. The company stressed that it complies with applicable legal requirements on Anti-Money Laundering, Know Your Customer and Counter-Terrorist Financing.
Tether is particularly popular in markets where dollars are limited or unavailable and in DeFi, which aims for a decentralised banking system.
Tether has long been a controversial company. In 2021, Tether agreed to stop doing business in New York after a two-year investigation by the New York attorney general found that it had made “false statements about supporting” its stablecoin.