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Tether Executives Face Possible DoJ Bank Fraud Probe - Bloomberg Report

From its inception in 2014, Tether is now a $62 billion stablecoin that underpins liquidity in the global cryptocurrency market.

Tether Ltd. could be facing a criminal probe into allegations that executives engaged in bank fraud by hiding that fact that some of its transactions were related to the cryptocurrency market.

Bloomberg reported Monday that the Department of Justice could bring formal charges in the coming weeks, a move that could rattle confidence in the so-called stablecoin market that underpins liquidity in Bitcoin.

"Today, Bloomberg published an article based on unnamed sources and years-old allegations, patently designed to generate clicks," Tether said in a statement emailed to TheStreet. "This article follows a pattern of repackaging stale claims as 'news.' The continued efforts to discredit Tether will not change our determination to remain leaders in the community."

"Tether routinely has open dialogue with law enforcement agencies, including the U.S. Department of Justice, as part of our commitment to cooperation, transparency, and accountability," the statement added. "We are proud of our role as industry leaders in promoting cooperation between industry and government authorities in the U.S. and around the world."

"We remain committed to our customers and the industry-leading technology and transparency that has led to our growth," Tether said. "It is business as usual at Tether, and we remain focused on how to best serve the needs of our customers."

Bitcoin prices pared some of their earlier gains in the wake of the Bloomberg report, but held over the $38,000 mark at $38,334.60 each.

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First created in 2014 as a bridge between traditional banking systems and the nascent crypto market, around $62 billion in 'tether' coins are in now circulation, ostensibly backed by an equal amount in cash, commercial paper, corporate bonds or other stores of wealth designed to protect investors from price swings.

Earlier this year, the State of New York shut down the the digital currency trading platform Bitfinex, which has common ownership with Tether, accusing it of hiding losses and deceiving clients, in a move that could have significant implications for bitcoin prices.

iFiniex, Tether and related entities were ordered to cease trading and pay $18.5 million in penalties. The groups were also told to increase their reporting and transparency with respect to tether's U.S. dollar backing.

Non-related lawsuits filed by crypotcurrency investors in October 2019 have claimed that Tether is being used to manipulate the price of bitcoin. 

The allegations say Tether is minted without the one-to-one- U.S. dollar backing, and then used to buy bitcoins on platforms such as Bitfinex. Bitcoin is then sold for U.S. dollars, and the proceeds are deposited into accounts that later confirm the one-to-one backing.