Tether Court Transcript Reveals Some USDT Reserves Were Used to Invest into Bitcoin (BTC)
As you may have heard, Tether, one of the most prominent stablecoins in the market, is currently having a battle with the New York Attorney General in order to prove that it had the resources to back its business.
The whole crisis started when Bitfinex, which shares the same owners as Tether (UDST) was in need of money because some of its partners had not paid it. Then Tether used its money in order to fund the company. The New York Attorney General discovered that the stablecoin’s parent company did it and sued it.
Now, TheBlockCrypto has done an investigation on this subject and discovered a new revelation which may complicate even more the situation for Bitfinex. Basically, the crypto media outlet discovered that some of the funds that Tether has are actually invested in Bitcoin, which is known for being highly volatile.
The order was issued against Tether by the NYAG back in April and it affirmed that Bitfinex borrowed funds from its sister company, which was deemed as illegal. The CEO of Bitfinex, Jean Louis van der Velde, affirmed that the lawsuit was actually pretty much filled with inaccuracies and false accusations against him.
What is actually new in this story is that The Block Crypto was actually able to find some more details about how the business was run. Only 74% of all Tether tokens were backed by real cash reserves, for instance, which is not the official discourse that the company had so far.
This culminated in the company affirming on its official site that its reserves included “cash equivalents” as well as real cash. Also, it affirmed that they received some assets via loans to third parties, which is what happened then.
Despite these changes, though, Tether has always claimed to be fully backed, which is why so many investors were surprised by the changes and some even got angry with the company. Each asset was supposed to be back 1-to-1.
However, the situation only gets worse and worse. A court transcript of May 16 was acquired by the crypto media outlet and it showed David Miller, an attorney, affirming that Tether did invest in other reserves like Bitcoin before it lent money to Bitfinex.
The CEO of the company has claimed since then that the NYAG is acting out of its jurisdiction by attacking the company this way because they restricted how the company was able to invest its money.
However, the New York Supreme Court Judge Joel M. Cohen has noted that it was an extremely paradoxical decision to invest in such a volatile asset like BTC if the coin was supposed to be stable in price. I guess we can all agree on that.
The judge affirmed that Tether was supposed to be some sort of calm in the storm and Bitcoin is pretty much the storm itself. Why invest in something so volatile if your goal is to have a token that will have prices which can remain stable.
While it was clarified that it was only a “small amount of Bitcoin”, the truth is that the owners of Tether tokens simply did not know that.
After the hearing, which happened on May 16, the judge allowed Tether to invest its reserves as part of its financial operations, however, he issued a primary injunction to the company. According to the injunction, Tether would have restained access to credit lines, would not tamper with the documents that were requested by the NYAG originally and its executives could not receive any dividends from the fund.
The injunction will work for 90 days initially and then the company can ask for a new extension which can take up to 14 more days.
Bitfinex is also reported to be working in order to pay Tether back, which is important in order to move forward in the whole controversy. The company has raised $1 billion USD selling its LEO tokens and plans to cover the $850 million USD it took from Tether using the money.