US regulators subpoena Tether and Bitfinex | finder.com

US regulators subpoena Tether and Bitfinex

Peter Terlato 30 January 2018 NEWS

Tether offers tokens valued at a 1-to-1 ratio with the US dollar, claiming all coins are backed by fiat currency.

The United States Commodity Futures Trading Commission reportedly issued subpoenas to digital currency exchange Bitfinex and self-proclaimed “stablecoin” Tether in December, according to Bloomberg sources.

Bitfinex is a Hong-Kong based digital currency exchange. Tether (USDT) provides cryptocurrency tokens valued at a 1-to-1 ratio with the US dollar. Tether claims all of its coins are backed by fiat currency stored in a reserve.

The two firms were subpoenaed on December 6, 2017, according to an unnamed source. Bloomberg contacted the companies for comment and discovered they share the same chief executive, Jan Ludovicus van der Velde.

“We routinely receive legal process from law enforcement agents and regulators conducting investigations,” Bitfinex and Tether said in a joint emailed statement. “It is our policy not to comment on any such requests.”

Bitfinex and Tether also share the same chief financial officer, chief strategy officer, chief financial officer and general counsel representative. Check out their respective senior management team bios: Bitfinex and Tether.

Tether claims to offer a stable alternative and potential substitute for unreliable exchange and wallet audits. The company lists its current balances on its website, divulging total liabilities and shareholder equities. There are currently US$2.27 billion worth of Tether assets in circulation, according to Tether’s transparency data.

Although the company claims its reserve account is “regularly audited”, there’s no evidence to support this.

In September last year, Tether engaged accounting firm Friedman LLP to perform historical balance sheet checks. A memo published later that month on Tether’s website revealed Friedman’s initial findings. As of September 15, company reportedly had US$443 million and €1,590 stored in undisclosed bank accounts. On the same day, Tether’s tokens were valued at approximately US$420 million, according to CoinMarketCap.

“We hope that the community considers the attached memorandum for what it is: a good faith effort on our behalf to provide an interim analysis of our cash position and our issued and outstanding tokens, as part of ongoing efforts to further professionalize the transparency mechanisms,” Tether said in an online statement.

However, the data was limited to just one report, as Tether severed ties with Friedman LLP earlier this week.

“Given the excruciatingly detailed procedures Friedman was undertaking for the relatively simple balance sheet of Tether, it became clear that an audit would be unattainable in a reasonable timeframe,” Tether said.

Considering Tether’s holdings have increased five-fold since the report was generated, social commentators and investors are beginning to ask questions and demanding the company conduct and release a proper audit.

In November 2017, Tether reported that its systems were hacked and $30 million worth of USDT was stolen. In April 2017, Tether’s primary banks in Taiwan were blocked by US correspondent banks, including Wells Fargo.

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