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Tether, has been accused of operating without much transparency touching on the $118 billion reserves. Cyber Capital Founder Justin Bons said that it is a bigger scam than FTX and Bernie Madoff.
He highlighted the absence of independent audits that would prove the existence of the company’s reserves. Critics claim it holds USDT without proof, which raises a lot of questions on the credibility of the asset.
Tether has not yet released the full audit of its reserves although the company has been promising this since 2015. It was penalized by the U.S. Commodity Futures Trading Commission (CFTC) in 2021. This was for submitting false claims about its reserves and yet, there is still no proper regulation over the company.
A lot of people are doubting the authenticity of Tether’s “transparency page.” It shows the company’s alleged reserves since no one has ever audited them.
Lack of Audits And Questionable Practices
Tether has been accused of not having an exhaustive audit despite being among the leaders in the crypto market. In 2021, Tether collaborated with BDO to issue what it calls an “auditor’s report.”
But critics say this is not the same as an actual audit. The company has also been accused of submitting fake documents and making false claims regarding the amount of assets it holds in reserves.
Another major issue is that Tether does not have clear distinctions between the company’s assets and its clients. Thus leaving the general public with no means to check Tether’s statements.
In a move that can be described as suspicious, it fired its first auditor in 2018 citing overly critical approach. Concerns regarding centralization and potential conflict of interest have also arisen, since Tether Holdings has only two board members.
Growing Concerns Over Tether’s Role in the Crypto Market
It has been argued that USDT’s market cap and dominance represent a threat to the rest of the crypto market. Tether having billions in assets makes people wonder about market manipulation and producing new tokens without proof of their backing.
The USDT is also prone to a ‘bank run’ as was the case with Terra Luna, according to Bons. Moreover, links with other firms that are also under scrutiny also put the company in a dubious position.
The connection between Tether and Bitfinex has also been an issue, due to the two having common management. Furthermore, U.S. authorities shut down one of Bitfinex’s previous banks, Crypto Capital, for money laundering, raising question over Tether’s credibility.
Alleged Involvement in Illegal Activities
Reportedly, Tether has been associated to billions of dollars attached to different crimes, including sextortion and ‘pig butchering’ scams. As reported by Bloomberg, blockchain analytics firm Elliptic said that USD Coin has facilitated over $11 billion worth of criminal transactions in the last three years.
Some of the popular platforms include the Huione Guarantee. It is reportedly involved in facilitating illicit trades, where USDT has been the preferred currency. Pig butchering scams, or schemes involving fake investment, are mostly said to use Tether.
Scammers and their clients are also said to be using Huione to launder funds from fraudulent activities, using Tether. Even with blockchain technology that is supposed to ensure transparency, these scams are still prevalent. Tether’s alleged participation has been a cause of concern to regulators.