CFTC Subpoenaed Bitfinex Cryptocurrency Exchange For Tether USDT

U.S. Regulators Subpoena Bitfinex and Tether

U.S. regulators issued a subpoena to Bitfinex, one of the world’s largest cryptocurrency exchanges, and Tether, the controversial USD “stablecoin” that claims to have reserves of $2.3 billion.

The news just broke online on January 30. However, the US Commodity Futures Trading Commission sent the subpoenas all the way back on December 6.

Bloomberg cited “a person familiar with the matter” as their anonymous source.

Bitfinex and Tether have faced intense criticism from the cryptocurrency community in recent months – mostly due to the use of Tethers as a tradeable currency. Tethers are coins offered to cryptocurrency exchanges that purportedly serve as a substitute for real fiat currencies. Tether claims their coins are backed 1:1 with real reserves – yet their auditing process lacks any sort of transparency.

Tether has yet to provide conclusive evidence of its holdings to the public, and the company has not had its accounts audited. This has led some to question whether or not the cash reserves are really there.

Today, there are about $2.3 billion worth of Tethers in circulation. That would mean Tether has a bank reserve of $2.3 billion stashed away.

“We routinely receive legal process from law enforcement agents and regulators conducting investigations,” Bitfinex and Tether said Tuesday in an emailed statement to Bloomberg. “It is our policy not to comment on any such requests.”

Meanwhile, the CFTC declined to comment on the matter.

In response, the price of bitcoin is falling this morning, dropping below $10,000 for the first time in weeks.

What’s the Connection Between Tether and Bitfinex?

Tether and Bitfinex are intricately connected. Neither Tether nor Bitfinex publicly disclose where they’re located or who’s in charge. However, Bloomberg cites a spokesperson for the companies when they claim a December 3 email revealed Jan Ludovicus van der Velde is the CEO of both Tether and Bitfinex. This email has been widely circulated throughout the cryptocurrency community in the last two months.

In other words, the cryptocurrency exchange and its fiat currency reserve token are run by the same person.

Phil Potter is also listed as a Tether director in a recent Paradise Papers leak. Those papers also reveal Potter is the Chief Strategy Officer at Bitfinex.

Lack of Auditing

The shady connections between Bitfinex and Tether are worrying enough. However, there are other serious red flags about the companies – including their lack of transparent auditing.

In 2017, Wells Fargo ended its role as a correspondent bank with Bitfinex and Tether. Previously, US customers could send money to Bitfinex and Tether’s Taiwan-based bank accounts using Wells Fargo as a correspondent bank. Bitfinex and Tether sued Wells Fargo, then later withdrew the complaint.

Bitfinex has not revealed which banks it uses today as correspondent banks. Bloomberg claims they were offered the information in exchange for a non-disclosure agreement – but they refused.

So how much money does Tether really hold? Theoretically, the USDT should be worth $1 USD because it’s backed by $1 real USD in a bank account. A document on Tether’s website shows they had $443 million USD in bank accounts as of September 15. The total Tether value was $420 million that day.

However, Tether has not revealed the banks where that money is held, and the names of those banks were censored on the document.

The accounting firm that compiled that report, Friedman LLP, recently cut ties with Tether. Here’s how Tether explained the breakup:

“Given the excruciatingly detailed procedures Friedman was undertaking for the relatively simple balance sheet of Tether, it became clear that an audit would be unattainable in a reasonable timeframe.”

Friedman LLP, meanwhile, has not yet issued a statement on why they ended their partnership with the company.

Stay tuned for more information as this Tether and Bitfinex news story continues to break. In the mean time, take a look at TrueCoin which is looking like a much better USD smart contract backed coin.