CFTC hits Tether with $41m fine for ‘misleading’ stablecoin claims
The Commodity and Futures Trading Commission (CFTC) has fined Tether $41 million for allegedly making “untrue or misleading statements” about the stablecoin’s US dollar backing.
The CFTC has also fined sister company Bitfinex $1.5 million
The Tether stablecoin is designed to always be worth $1 and fully backed by reserves. While there is more than $69.3 billion in Tether in existence, only around 2.9% of that figure is backed by cash, with the majority backed by commercial paper.
According to the CFTC, Tether was fully backed by reserves for only six and a half months between 2016 and 2018.
The regulator also alleges Tether comingled reserve funds with its own corporate funds and held reserves in non-cash products.
The CFTC claims Tether “falsely represented” that it would undergo routine, professional audits to demonstrate that it maintained “100% reserves at all times” even though Tether reserves were not audited.
In response, Tether says there is “no finding” that Tether tokens were “not fully backed at all times”. It adds the findings discovered “simply that reserves were not all in cash and all in a bank account titled in Tether’s name, at all times”.
Separately, the regulator has also fined Tether’s sister firm Bitfinex $1.5 million in connection with the operation of the Bitfinex cryptocurrency trading platform.
The order finds Bitfinex engaged in “illegal, off-exchange retail commodity transactions in digital assets” and operated as a futures commission merchant without registering.
“This case highlights the expectation of honesty and transparency in the rapidly growing and developing digital assets marketplace,” says CFTC acting chairman, Rostin Behnam.
“The CFTC will continue to take decisive action to bring to light untrue or misleading statements that impact CFTC jurisdictional markets.”
