Tether Management Said to be Target of Criminal Investigation by US Department of Justice

Tether, the largest stablecoin by market cap, is said to be a target of a criminal investigation in the US. According to a report in Bloomberg, the US Department of Justice is investigating whether, or not, executives committed bank fraud.

Rumblings have long swirled around Tether and questionable activity. The company has been targeted by the state of New York in the past. Tether eventually reached a settlement of legal proceedings with the New York AG’s Office. Under the terms of the settlement, Tether admitted no wrongdoing while paying an $18.5 million penalty to settle the dispute with the NYAG.

But a federal inquiry and criminal investigation may have a profound impact on Tether and its utilization in the crypto markets. Typically stablecoins are used by traders, both large and small, to quickly move in and out of crypto holdings. Tether (USDT) is the third-largest crypto by market cap, following Bitcoin and Ethereum, at over $60 billion. Tether’s 24-hour trading volume recently booked over $74 billion – more than either Bitcoin or Ethereum.

In the past, Tether has sought to allay concerns that all Tether tokens are fully backed by Tether’s reserves. Tether has published a report by auditors from Moore Cayman attesting to Tether’s status. The company has stated:

“Since the founding of Tether, we have made earnest and continuing efforts to enhance our public disclosures and communications. As a leader in the growing cryptocurrency industry, we remain committed to being among the most transparent stablecoins. This latest assurance opinion—and our dedication to providing further reports moving forward—is a reflection of that commitment.”

A broader audit is said to be forthcoming.

The Bloomberg report shared a statement from the company:

“Tether routinely has open dialogue with law enforcement agencies, including the DOJ, as part of our commitment to cooperation and transparency.”

Last week, it was reported that Jeff Dorman, Chief Investment Officer at Arca, has labeled Tether the “the biggest (and only) systemic risk to the digital assets ecosystem.”

Dorman worried that Tether was too large, and too heavily, utilized on exchanges. Dorman said it may “cause major hiccups and ripple effects should USDT lose its peg and cause a run on the bank.”

While Tether may hold system risk, any loss of confidence would be of benefit to other stablecoin competitors. USDC, created by Circle, is said to be the fastest-growing stablecoin in the ecosystem. USDC’s most recent market cap stood at around $27 billion and $3 billion in daily volume.

The US Department of Justice has yet to issue a statement on any investigation involving Tether.

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