When people think of the stablecoin in the crypto market, the most popular name that comes to mind is Tether, for both its high capitalization and also the immense drama that has surrounded it. In the last week, the platform ended up issuing over $300 million in USDT in the last week. However, based on the sudden surge in their supply, there are rumors starting to circulate that Tether is diving back in to market manipulation as it has before. With that rumor, the previous rumor that the stablecoin is not actually backed by dollar reserves has risen again, according to reports from CryptoSlate.

Tether, along with Bitfinex, has been tied to a substantial level of controversy over the years. The USDT stablecoin from Tether has a responsibility to uphold billions of dollars in value within the industry and losing the faith that many investors have in this stablecoin could send the value of Bitcoin into a downward spiral.

At this point, Tether is hardly helping the rumors or reputation it has earned, because the platform has not been willing to go through any audits or share the relationships that it has with banks. With so little (if any) transparency, and no evidence that they are doing what they say, there is a lot of debate that the stablecoin does not actually have the 1:1 ratio with the dollar that it says it has.

The US Department of Justice (DOJ) has even caught wind of the rumors, leading them to launch a criminal probe with the company. The probe will focus on the possibility that Tether is involved with Bitcoin price manipulation, either through USDT or Bitfinex. If manipulation is discovered, then it is very possible that Bitcoin’s price and trading volume is significantly overinflated.

As of April 8^th, the circulating supply of USDT started increasing, slowing rising up by $417 million. As soon as this move happened, Bitfinexed too notice. The watchdog says that they were the ones behind exposing the “Bitfinex/Tether scam,” which was ultimately discussed in other major publications like Bloomberg, the New York Times, and the Wall Street Journal.

https://twitter.com/Bitfinexed/status/1116892871993569280

Professor John Griffin of the University of Texas and Amin Shams conducted some research together on the topic, allegedly finding evidence that Bitcoin price manipulation is occurring. In an interview last summer with Bloomberg, Griffin said that the Tethers are created first by the company in “large chunks, such as 200 million.” The coins then go to Bitfinex. As Bitcoin’s price drops after those tokens are issued, the Tethers held by Bitfinex and other crypto exchanges purchase Bitcoin, inherently pushing up the price again falsely.

If the evidence proves to be true, then these actions would coincide with the changes in the Terms of Service with Tether, which recently stated that USDT is backed up by assets other than the dollar. The new terms also say that the company is not responsible for the losses that holders incur through their participation.

CEO Jesse Proudman of Strix Leviathan commented that the reason that Tether is considered to be worth a dollar is because it is “generally agreed upon” to be true, rather than actually being redeemable for such. Without that kind of faith from investors, Proudman notes, the possible consequences “would be material, widespread and volatile.”