It’s official, the tether battle ends today as both ifinex and Tether settled in court for $18.5 million, ending the two year-battle with New York’s Attorney general so let’s read more in our latest Tether news.
Today, the Tether battle ends as Attorney General Letitia James announced that Tether and Bitfinex will have to pay $18.5 million in fines and will be required to submit reports about the state of their operation. They will have to stop doing business with New York customers too. The lawsuit was launched 22 months ago when James and her office sued iFinex for using Tether’s USDT crypto to cover up to $850 million in lost funds. USDT is a stablecoin which means it is pegged to fiat currency and the issuer is always supposed to hold as much in fiat as it creates in crypto. However, Tether raised suspicion over the past claims about how much money It is holding and for issuing new USDT en masse.
Much of the New York Attorney General investigation into Tether centered around whether each USDT is really backed 1-to-1 by fiat as the company claimed. Both Bitfinex and Tether have to pay $18.5 million in fines and for the next two years, they will be required to submit reports about how much money they have in their reserves and to how to exclude New York citizens from their services. The NYAG mandated that Tether and Bitfinex include info about transfers of funds along with “verification that Bitfinex and Tether have segregated client, reserve and operational accounts.”
The OAG said that Tether didn’t quite explain how USDT is backed. Tether’s line was following:
“Every tether is always backed 1-to-1, by traditional currency held in our reserves. So 1 USDT is always equivalent to 1 USD.” But Tether changed its tune in February 2019, claiming that each USDT is actually backed 100% by “reserves”—an ambiguous term that can include fiat currency, the company said, but may also involve “other assets and receivables from loans made by Tether to third parties.”
The OAG wrote that in 2017, the company only had $61 million on hand for the 442 USDT in circulation. USDT was not fully backed so Tether released an update that included a bank statement with the $442 million in cash. This was misleading as the bank’s statements were unable to reflect properly on the Tether balance.
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