Ali Raza
A US Judge has ordered USDT stablecoin issuer, Tether, to provide proof of what backs its stablecoin. The proof will be part of a market manipulation lawsuit alleging that USDT had artificially inflated the prices of cryptocurrencies.
US Judge orders Tether to prove cash reserves
Judge Katharine Polk Failla ordered the court to request Tether provide “undoubtedly important” documents related to the assessment of USDT backing through US dollars. According to the court, there is evidence that supports the claims made by Tether of supporting a treasury that fully supports its stablecoin.
The orders given by the judge will mandate Tether to produce documents that will prove USDT reserves, such as the account statements of banks and other institutions responsible for its funds. The other needed documents include financial statements.
Tether has responded to the order saying that it was a “routine discovery order.” The USDT stablecoin issuer has also said that the order did not prove that the claims made by the plaintiffs had merit.
The company has released a statement saying it had already agreed to produce enough documents to establish the reserves backing USDT, and the matter concerned the scope of documents that needed to be produced.
USDT is the largest stablecoin by market cap. However, the issue of what backs USDT has been under contention for tears. Initially, Tether claimed that each USDT token was backed with a 1:1 ratio of US dollars.
In 2021, the New York Attorney General’s office ended an investigation into Tether and Bitfinex, its parent company, after an 18.5 million settlement deal. The attorney general’s office found that the company used company and customer funds to hide an $850 million loss.
The NYAG said that USDT for a certain period after November 2018. Tether has also claimed that USDT was fully backed by reserves, with part of the settlement demanding that Tether submits quarterly reports to the NYAG.
Tether claims USDT is partially backed with commercial paper
USDT was under stress earlier this year after the crypto traders rushed to redeem billions of dollars worth of USDT amid tumbling prices and the fall of DeFi lending platforms like Celsius. Despite USDT dropping slightly to $0.98, Tether claimed it redeemed all USDT tokens at $1.
Tether has claimed that USDT is backed by cash, bank deposits, and commercial paper. The nature of Tether’s commercial paper has never been made public through a complete finance audit. Therefore, the recent court order is more interesting.
In the lawsuit, the plaintiffs alleged that Tether’s USDT was not backed and printed out of thin air. They added that the stablecoin was used to inflate the price of Bitcoin after being transferred to the Poloniex and Bittrex exchanges.
The representative of Tether, Elliot Greenfield of Debevoise & Plimpton, has urged the court to deny the “unreasonable” request, adding that the plaintiffs did not show good cause. Greenfield also said the requests were cumbersome because they were linked to all the cryptocurrency transactions linked to Bittrex and Poloniex.
The lawyer has also said that the plaintiffs did not provide any justification for these extraordinary requests, saying they needed to assess whether the transactions had a strategic timing to inflate the market. However, the judge has turned down the requests made by Tether’s attorney, saying that the court agreed the documents the plaintiff sought were vital to the lawsuit.
Related
- Tether Reserves Audit Pushed Back, Now ‘Months Away’ Says CTO Ardoino
- Where to Buy Tether UK – Beginner’s Guide
- After LUNA and UST – Will Tether Stablecoin Be Next to Fail?
Tamadoge - The Play to Earn Dogecoin
- '10x - 50x Potential' - CNBC Report
- Deflationary, Low Supply - 2 Billion
- Listed on OKX, Bitmart, LBank, MEXC, Uniswap
- Move to Earn, Metaverse Integration on Roadmap
- NFT Doge Pets - Potential for Mass Adoption
This article was written for Business 2 Community by Ali Raza.
Learn how to publish your content on B2C
Join our Telegram channel to stay up to date on breaking news coverage
Add B2C to your Google News Feed
Discuss This Article
Add a New Comment /Reply
Thanks for adding to the conversation!
Our comments are moderated. Your comment may not appear immediately.