New York state attorney general Letitia James
New York state attorney general Letitia James.Spectrum News NY1

Tether is currently on the radar of the authorities as the New York court approved an investigation of businesses involved with the cryptocurrency. Reported by Forbes, the investigation is based on subpoenas, filed by the attorney general, and has no formal accusation of criminal activity. The case is also supported by an opinion published by the appellate division of New York’s Supreme Court.

The news about the investigation could not come at a worse time for the Tether co-founder Brock Pierce, who just announced that he will be running for President of the United States in the upcoming elections. Pierce is running as an independent candidate and shares a pro-technology political program.

Launched in October 2014, Tether is a fiat-backed stablecoin, which aims to enable the use of fiat currencies in the emerging digital asset markets. It was the first so-called ‘stablecoin’ to be launched in the world. Backed by the U.S. dollar, one tether supposedly always cost $1, which now, after a series of accusations and company updates, is questionable.

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Doubts about Tether’s backing by the US dollar started to emerge in November 2018. Back then, an investigation was started by the former state attorney general of New York. However, it was stopped, or paused, as it seems, due to an appeal filed by Tether and Bitfinex.

With a total market value of $10 billion, the news of the now-resumed investigation could bring trouble for everybody involved with tether. The entities that are officially investigated are Tether Holdings Limited, Tether Operations Limited, Tether International Limited, and the subsidiaries of iFinex – BFXNA Inc. and BFXWW Inc.. iFinex is a Hong Kong-headquartered company operating the Bitfinex cryptocurrency exchange. When asked for an official confirmation, a New York State Attorney General Representative commented that he “cannot confirm or deny that the investigation” involves Brock Pierce.

Letitia James, the New York state attorney general, declared:

“Today’s decision validates our office’s ability to use its broad and comprehensive investigative powers to protect New Yorkers. Not even virtual currencies are above the law. We are pleased with the court’s decision, and will continue to protect the interests of investors in the marketplace.”

James gathered information alleging that Tether used foreign organizations to handle customer deposits and withdrawals because it was not able to receive banking support. In particular, Bitfinex passed $850 million to Panama-based payments processor Crypto Capital Corp, to handle client-withdrawal requests. Tether covered up their losses, leaving investors to suspect that they just started to print more tether that has no backing whatsoever. It was around this time when the content on Tether’s website was altered. Once explaining that each tether is backed by a U.S. dollar, it now states that it is backed by Tether Holding’s reserves.

It is going to be a very long and complex case. As the opinion by the Supreme Court, written by Ellen Gesmer, reads:

“Respondents argue that tether does not qualify as a security or commodity as those terms are defined in the Martin Act and that the motion court thus lacked subject matter jurisdiction over them. I disagree.”

It is exactly the Martin Act, which grants the state of New York the authority to commence investigations, even if nothing is proven or there are no actual losses at the moment.

Still, despite all allegations and investigations, tether’s market cap has grown from $4.1 billion to $10 billion since September 2019.

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