Tether Under Spotlight Again: Print 640 Million USDT in April, Sued By NY Attorney General
Tether (USDT), the cryptocurrency marketed as a stablecoin backed by the U.S. dollar, has minted another 640 million tokens this April, among which a fresh batch of nearly 420 million USDT was issued on Omni (300 million), Ethereum (70 million) and Tron (49.9 million) network in the last two days.
The action of Tether soon triggered heated discussion among the crypto community. Some crypto traders claimed that these newly printed USDT might have been used to prop up bitcoin price in April. It is not the first time that the USD-pegged crypto token is suspected to be involved in market manipulation. The U.S. Department of Justice has opened an investigation into it at the end of last year.
At the night of April 25, a report on Tether from the Wall Street Journal once again roiled the crypto space. According to the report, Bitfinex and Tether are sued by the New York Attorney General for illicitly using Tether’s reserves to secretly cover the $850 million loss of the crypto exchange Bitfinex.
According to the filings, Bitfinex never revealed the loss to investors, with executives of the exchange and Tether engaged in a series of conflicting corporate transactions where Bitfinex got access to up to $900 million of Tether’s cash reserves. Bitfinex allegedly took not less than $700 million from Tether’s reserves and used the funds to hide losses and inability to handle clients’ withdrawals.
The attorney general’s offices said it has obtained a court order directing iFinex to stop moving money from Tether’s reserves to Bitfinex’s bank accounts, halt any dividends or other distributions to executives and turn over documents and information.
As of press time, Tether has come out fighting back the allegation. In its response to the NY Attorney General’s actions, Tether claims that the purported $850 million “loss” is not lost but have been seized and safeguarded, they are currently “actively working to get those funds released”.
In the strong statement, the company condemns the New York Attorney General’s office’s “gross overreach against companies that are good corporate citizens and strong supporters of law enforcement”.
Zhao Dong, one of the biggest bitcoin OTC trader in China who is a shareholder of the crypto exchange Bitfinex, told the Chinese crypto community in a telegraph group,
Bitfinex claimed that the allegation from the New York Attorney General is a typical American gangster’s action, and that the exchange in fact used part of their profit generated in 2018 for users’ cash withdrawal. The company added that they have profited in $400 million in 2018 but only spent $12 million in expenses of the year.
Tether has made its name in the crowded cryptocurrency space by claiming that its so-called stablecoin is 1:1 pegged to the US dollar. Since then, the dominant stablecoin has been entangled in controversies centering on whether it has sufficient reserves for its dollar peg claim. It was more heatedly discussed when the stablecoin announced to remove its dollar peg this February.
Considering it has successfully come off the troubles and issues in the past, many traders in China, where users have to first buy Tether USDT with fiat to get into crypto transaction, said they believe Tether can also make it through this time.
According to the OTC (over-the-counter) price for USDT on the Huobi exchange now marks $6.86, which is 1.78% less than that of a week ago.