USDT deadline: When will Tether produce evidence of its stablecoin backing?
13:32, 23 September 2022
The stablecoin tether (USDT) has been ordered to provide evidence of its one-to-one backing to the US dollar in what it described as a “baseless lawsuit”.
This order came from Katherine Polk Failla, the judge of US District Court for the Southern District of New York.
Tether has been asked to deliver “general ledgers, balance sheets, income statements, cash-flow statements, and profit and loss statements”.
The case dates to 2019 when a group of investors alleged that Tether and the crypto exchange Bitfinex engaged in market manipulation by issuing USDT that were not backed by the US dollar with the intention of using them to buy bitcoin (BTC).
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Both Tether and Bitfinex have denied these allegations and the stablecoin has referred to the new order to produce reserve backing as “a routine discovery matter in a meritless case”.
Tether also added that this is a “routine discovery order” and does not “in any way substantiate plaintiffs’ meritless claims”.
When asked by Capital.com when will the stablecoin produce the evidence of its backing that has been requested, it said the statement it had already released is all it has to say on the matter.
Judge dismisses request to block order
Judge Failla denied a request from Tether and Bitfinex’s parent company iFinex to block the order as the company had already produced documents earlier on. However, the judge found the plaintiff’s demands for “undoubtedly important” documents as they “appear to go to one of Plaintiffs’ core allegations”.
Still, in September 2021, Judge Failla also dismissed half of the class-action plaintiffs’ claims against iFinex under the Racketeer Influenced and Corrupt Organisations Act (RICO). Tether said following this, the case was in “shambles”. Again, Tether stated this claim too was “meritless” and added: “We are grateful to Judge Failla for her meticulous opinion, which exposed many deficiencies in the plaintiffs’ claims.”
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In February 2021, Tether and Bitfinex settled with the Office of the New York Attorney General and paid $18.5m (£16.7m) in damages to the state of New York and submitted to the periodic reporting of their reserves.
New York alleged that Tether misrepresented the degree to which its coins were backed by fiat collateral.
The settlement required Tether and Bitfinex to periodically submit reporting of their reserves as well as providing public reports for the specific composition of their cash and non-cash reserves. The reports need to be submitted every quarter for two years.
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Tether claims to keep the US dollar ‘strong’
Despite these court cases questioning Tether’s backing to the US dollar, the stablecoin claimed it is helping keep the US dollar “strong”.
The stablecoin stated in September 2022 that the US dollar was “the most sought-after fiat currency in the world” and the USDT stablecoin creates a way for more people to have access to it, as some people still find it “challenging” to hold or acquire US dollars in numerous countries outside the US. The coin’s organisation said:
In May 2022, Tether became a buyer of US Treasuries. It accounted for 2% of the total Treasuries market, which exceeded the stake held by Berkshire Hathaway, the American multinational conglomerate holding company led by Warren Buffett, at the time.
Tether did not disclose how much of the US Treasuries it accounts for now, but said it still “represents a significant buyer in the US Treasuries market”.
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