- A WSJ report claims Tether is under US investigation for potential sanctions violations and money laundering activities.
- The report states that the US Treasury may impose sanctions on Tether due to its usage by sanctioned entities such as Hamas and Russian arms dealers.
- Tether CEO Paolo Ardoino refutes the claims, maintaining close cooperation with law enforcement and asserting false allegations.
- Despite controversy over reserve transparency, Tether claims full backing of its stablecoin, though it lacks a formal audit.
A recent report by the Wall Street Journal claims that Tether is under investigation by US authorities. The WSJ wrote, citing people close to the source, that the US federal government is looking into Tether’s operations “for possible violations of sanctions and anti-money-laundering rules”.
The report alleges that officials are investigating if Tether’s stablecoin USDT was used in drug trafficking, terrorism, cybercrime, or money laundering.
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According to the report, there’s also a possibility that Tether faces serious ramifications such as sanctions by the US Treasury, over alleged frequent use of USDT by sanctioned groups such as Hamas and Russian arms dealers.
CEO Calls Report ‘Old Noise’ Despite Signs of Ongoing Investigations
Tether CEO Paolo Ardoino strongly denied that there’s any truth to the claims, saying the “WSJ is regurgitating old noise. Full stop.”
Ardoino went to platform X to dispel the FUD, saying that the stablecoin issuer works regularly with law enforcement.
At Tether, we deal regularly and directly with law enforcement officials to help prevent rogue nations, terrorists and criminals from misusing USDt. We would know if we are being investigated as the article falsely claimed.
Paolo Ardoino Tether CEOAnd as Tether hasn’t received any notice, they can “confirm that the allegations in the article are unequivocally false”, he added.
At the Plan B Forum conference in Lugano, Switzerland, the CEO confirmed that Tether holds 82,454 Bitcoin and 48.3 tons of gold as reserves.
On its website, Tether is pledging transparency, claiming “all Tether tokens are pegged at 1-to-1 with a matching fiat currency and are backed 100% by Tether’s Reserves”.
However, there has been controversy around Tether, its reserves, and the potential use of USDT in nefarious activities for years.
Bloomberg reported in March of 2024 that US and UK authorities had been going through US$20 billion of transactions on Garantex, a Russian crypto exchange, sanctioned by the US and UK over the suspected involvement in “financial crimes and illicit transactions in Russia”.
Tether Says Reserves Are Fine, Trust Us, Bro
And then there’s the question of the USDT reserves. Tether has always promised transparency yet never delivered an independent audit report. Tether explains this by saying that an audit with the Big Four accounting firms is difficult as they’re hesitant to engage with Tether.
Currently, BDO Italia does proof-of reserves for Tether which are mere attestations, not fully-fledged audits.
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USDT is the third-largest cryptocurrency by market cap with US$120 billion (AU$181.6 billion). A failure of Tether could drag down the whole crypto industry, Hilary Allen, a law professor at American University told Bloomberg.
If Tether were to go to zero tomorrow, it would be disastrous for the crypto economy.
Hilary Allen, law professor at American UniversityBased on a scale of 1 to 5, with 5 meaning weak, Tether received a rather sobering rating in the 2023 S&P Global Stablecoin Stability Assessment with a score of 4, termed ‘constrained’.
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