October 6, 2022


Stablecoin issuer Tether has received a court order to produce financial records proving its USDT backing. Judge Katherine Polk Failla of the Northern District Court of New York issued the order row for Tether on Tuesday at the plaintiff’s request to prove its reservations. The latest order for Tether comes as part lawsuit filed in 2019 by a group of traders against iFinex, the parent company of Tether and the Bitfinex exchange.

The case involves a University of Texas research report from 2018. Experts found that Tether’s sister company Bitfinex bought Bitcoin with unbacked USDTs to deliberately drive up the price of BTC. And it resulted in a crash of over 1 trillion in the market.

Related reading: Arbitrum Pays Hacker Big Bounty for Identifying Bug

After a long 22-month investigation, the lawsuit ended with a settlement of $18.5 million. The New York Attorney General (NYAG) halted the investigation into Bitifinex and Tether in February 2021, and the companies agreed to end their services to New Yorkers.

In addition, the Attorney General found that iFinex commingled company and customer funds to obstruct the $850 million in losses it faced because of a lawsuit against his partner payment channel Crypto Capital Corp.

Understandably, this indicates that Tether’s USDT was not backed by 100% reserves for the time space around November 2018, NYAG said. Although the company claimed that its stablecoin, USDT, is always backed 1:1 by the US dollar. Therefore, Tether is required to publish a quarterly report on its supporting assets as part of the settlement.

USDTUSD
The price of USDT is currently trading below $1. | Source: USDTUSD price chart from TradingView.com

Tether intends to keep information about its reserves secret

Although Tether attached documents on its website while revealing its reserve, the report does not provide a detailed picture of its supporting assets.

Therefore, the Judge has now ordered the respondent company to release information from its “general ledgers, balance sheets, income statements, cash flow statements and profit and loss statements (…) as they relate to the USDT’s support (RFPs for financial records [requests for proposal]) and crypto commodity transactions (RFP transactions).”

The court order also requires the firm to provide details of its accounts on Poloniex, Bitifinex and Bittrex.

Lawyers representing Tether sought to overturn the judge’s order, calling it “unduly burdensome.” In addition, they argued that disclosing the composition of its reserves would be detrimental to its business.

Defendants added during court verdict;

The plaintiffs offer no justification for such extraordinary claims, saying only that they must assess whether the transactions were strategically timed to inflate the market.

Related reading: Kraken CEO Jesse Powell departs, COO to take his place

But Failla noted that the documents the plaintiffs are seeking are undeniably important in determining USDT’s support for US dollars. Accordingly, the judge affirmed her decision, adding:

The plaintiffs clearly explain why they need this information: to assess USDT’s support for US dollars. (…) The documents requested in the transaction RFPs appear to relate to one of the plaintiffs’ key claims: that the B/T defendants engaged in crypto-commodity transactions using unbacked USDT.

Featured image from Pixabay and chart from TradingView.com



Source link

Leave a Reply

Your email address will not be published.