The US seeks evidence of bank fraud in Tether, the most used cryptocurrency in the world

US seeks evidence of bank fraud in Tether

A new busy week begins for bitcoin, with tether again as the protagonist. As revealed by the Bloomberg agency, the US Department of Justice is investigating the company that issues this cryptocurrency, which claims to be equivalent to a dollar and is the most used in the world today. An investigation that adds to that of the New York Prosecutor’s Office, which fined its issuer, the Bitfinex exchange house, with 18 million dollars for irregularities in its accounts.

The tether appeared in 2014 as a way to be able to exchange bitcoins on Bitfinex without having to use real money, thus avoiding the regulations imposed by the US Government, the Federal Reserve and the SEC on companies that buy and sell dollars. But the company needed to save the dollars it received and delivered to users somewhere, even though all operations in the meantime were done with tethers. Precisely, the North American Justice accuses Bitfinex and its subsidiary, Tether, of having deceived the multiple American banks with which it operated, such as Wells Fargo or Citibank, among others, hiding their real business from them.

The news came a few hours after the price of bitcoin soared, driven by massive sales of tethers on Binance, an exchange that does not accept dollars and only allows buying or selling bitcoins with tethers and other similar cryptocurrencies, such as USDCoin or BinanceCoin. The sale on Sunday afternoon was so massive that the price of bitcoin shot up to 48,000 tethers per unit, which spread to other exchange houses that do accept dollars, where it jumped to around 38,000, where it remains this Monday.

For years, tether has been the currency used in most cryptocurrency operations: according to theblock data for this month, 64% of crypto exchanges are traded in tethers, while the dollar is only 12 % of operations, and the euro, 4%. On paper, given that tethers are ‘worth’ a dollar, and almost all exchange houses accept it as such, there is no difference between trading one and the other within the cryptocurrency environment.

The problem is that there is no guarantee that the issuing company will be able to pay the equivalent amount in dollars to the holders of tethers if they ever want to sell them and get out of the game: in May, the company reported that it only has slightly more than 2 billion in cash for more than 60 billion tethers issued to date. The rest is on “commercial paper” – short-term corporate debt – unspecified, and which would be equivalent to 3% of all debt issued by US companies currently in circulation, an unheard-of figure.

The other problem, of course, is that the vast majority of crypto users are operating with a currency issued by a private company, which owns one of the largest cryptocurrency exchanges, and which is already being investigated for possible fraud and manipulation. market. The big sale of tethers the day before the announcement of an investigation on the company, to say the least, is food for thought. It is perfectly possible that there is nothing irregular in everything that happened, but everything that has to do with tether has been smelling bad for some time, and analysts have been warning it for months