Summary

  • A recent report by WSJ alleges that Tether, the company behind the world's largest stablecoin, used fake documents and shell companies to facilitate its parent company's entry into the banking system.
  • Tether has been accused of relying on problematic third parties, some of whom had connections to a designated terrorist organization, to support its operations.
  • Tether has responded to the report, calling it "wholly inaccurate and misleading" and stating that the company has robust compliance programs and adheres to legal requirements.

Tether's challenges persist as a recent report from WSJ alleges that companies supporting the world's most extensive stablecoin, USDT, resorted to phony documents and shell firms to facilitate its parent organization's entry into the banking system. The Journal cited emails and documents, revealing that the company went above and beyond to stay connected to the conventional financial system and create bank accounts. The report also suggests that Tether relied on third parties that used "hundreds of millions of dollars of seized assets and connections to a designated terrorist organization," as seen in official documents. Moreover, the US Justice Department is currently investigating Tether.

According to an email cited by WSJ, Stephen Moore, one of Tether Holding Ltd.'s owners, admitted that a significant Chinese trader tried to "circumvent the banking system by providing fake sales invoices and contracts for each deposit and withdrawal." Moore ultimately decided to terminate the backer, calling it "too risky."

In response to the WSJ report, Tether issued a statement on Friday, calling it "wholly inaccurate and misleading," and asserting that the company has robust compliance programs and adheres to relevant Anti-Money Laundering, Know Your Customer, and Counter-Terrorist Financing legal requirements.

Tether's core business is generating USDT, the third-largest cryptocurrency after Bitcoin and Ethereum, with a market capitalization of $71 billion. As a stablecoin, USDT is a digital asset backed by a stable asset, such as the US dollar, and is popular in markets where dollars are restricted or unavailable, as well as in DeFi, which aims to disintermediate banks. USDT is the most widely traded digital asset, as people use it to enter and exit trades quickly without using traditional banks or fiat currencies.

However, Tether has been controversial for some time. It has yet to provide documentation proving that its stablecoin is backed by US dollars, and it is not audited independently. In 2021, Tether agreed to cease operations in New York after a two-year investigation by the New York Attorney General found that it had made "false statements about the backing" of its stablecoin.