Tether denies allegations by WSJ of faked documents and circumventing banking regulations.
Tether has fired back at The Wall Street Journal (WSJ) after it published a report accusing the company of faking documents to open bank accounts. The WSJ report alleged that Tether and Bitfinex, its sister cryptocurrency exchange, faked sales invoices and transactions. Moreover, the report claims that they relied on third-party entities to gain access to the banking system. Tether, the issuer of the popular USDT stablecoin, rejected the allegations as “wholly inaccurate and misleading.” Additionally, the company insisted that it had a world-class compliance program that met Anti-Money Laundering (AML), Know Your Customer (KYC), and Counter-Terrorist Financing (CTF) legal requirements.
The WSJ report, published on March 3, was based on leaked documents and emails that suggested that Tether and Bitfinex had used shell companies and falsified invoices to maintain access to the banking system. The report also claimed that Tether and Bitfinex had links to entities that laundered money for US-designated terrorist organizations. The allegations came on the heels of a separate WSJ report in early February that claimed four individuals controlled approximately 86% of Tether since 2018.
In a statement, Tether dismissed the WSJ report as “stale allegations from long ago.” It emphasized that it was a “proud” partner of law enforcement agencies. It also emphasized that it routinely assisted the United States Department of Justice and other law enforcement organizations in preventing money laundering, terrorism, and other crimes. The company argued that it had offered the most liquid and reliable stablecoin experience. Consequently, this made Tether the leader in the industry.
In a similar manner, CTO of Tether Paolo Ardoino tweeted this about the “noise” that WSJ is trying to cause:
WSJ Report: Tether “Skirted” Banking Regulations
The WSJ report suggested that Tether and Bitfinex had tried to stay connected to banks and other financial institutions that were vital to their operations. Then, the report cited a lawsuit filed by Tether and Bitfinex against Wells Fargo bank. That lawsuit claimed that being cut off from financial institutions would be an “existential threat” to their business. One leaked email indicated that intermediaries based in China had tried to “circumvent the banking system by providing fake sales invoices and contracts for each deposit and withdrawal.”
The WSJ report also claimed that Tether and Bitfinex had taken various measures to evade controls that would have limited their access to financial institutions. The report suggested that Tether and Bitfinex had ties to a firm that laundered money for US-designated terrorist organizations. Also, the report added that Tether was under investigation by the US Department of Justice as part of a probe headed by the US Attorney’s Office for the Southern District of New York. The nature of the investigation was not specified.
Tether’s response to the WSJ report echoed its response to similar allegations in the past. The company has previously faced allegations of wrongdoing and had to downplay a separate WSJ report in December 2020 concerning its secured loans. The company has also faced criticism for its opaque reserves and its alleged involvement in propping up the Bitcoin market.
More Regulatory Scrutiny
Despite Tether’s insistence that it had a world-class compliance program that adhered to AML, KYC, and CTF legal requirements, the company has faced regulatory scrutiny in the past. In 2019, the New York Attorney General’s Office sued Tether and Bitfinex, alleging that Tether’s stablecoin was not fully backed by US dollars, as the company had claimed. The lawsuit was settled in February 2021, with Tether and Bitfinex agreeing to pay an $18.5 million fine.
Tether’s response to the WSJ report suggests that the company is confident in its compliance program and its relationships with law enforcement agencies. However, the allegations in the WSJ report and the company’s past regulatory troubles may raise concerns among investors and regulators. Tether’s stablecoin is widely used in the cryptocurrency market and has been credited.
Tether is not the only one to receive criticism lately as FUD regarding stablecoins continues. BUSD and USDC are also under regulatory scrutiny at the moment.
However, this is not the first time that mainstream media tries to impose more FUD in the market. These are the same media outlets that tried to victimize Sam Bankman-Fried (SBF) and avoid the fact that he misused users’ funds.