In a scathing new report by the journalistic geniuses at Bloomberg, Tether, the world’s largest stablecoin, is in hot water according to Mike Bloomberg’s company.
As if we haven’t seen enough crypto firms, banks, and stablecoins falter, this might be the coming of the end for yet another one. And this time, we can see it coming before it happens.
What Will We Do, If Anything?
Let’s dive into what exactly is happening behind the secretive doors of the stablecoin operator, Tether.
Backing up after Signature Bank collapsed last month, most of its assets and some of its loans were taken over by New York Community Bancorp (NYCB).
All crypto-related clients, however, were told that their accounts would be closed in short order. Signet, Signature Bank’s proprietary software that allowed its crypto clients to transact in USD between such platforms at all hours of the day, remained in receivership at the time of this writing.
When Signature originally went under, Paolo Ardoino—Tether’s CTO —stated that Tether had no exposure to Signature Bank.
While Tether did not have an account opened at Signature, unnamed sources have stated that the firm did use Signet, according to Bloomberg.
Comments From Tether
“Banks used by Tether always had access to several banking channels and counterparties. This enabled us to identify particular risks and weaknesses that others had missed, ensuring our entities wouldn’t be affected by either direct or indirect exposure to Signature.”
It’s unclear whether this arrangement was set in stone for all transactions of this type or whether Signature Bank knowingly approved the use of Signet by Tether.
Alma Angotti, a former SEC and the Treasury Department representative stated that if Signature knew about the arrangement, it could have been a way of dealing with Tether without taking on all the risk of working with an offshore stablecoin company.
“If Signature knew about and allowed the arrangement, that may speak to a high-risk appetite. They may well have known and decided this is less risky than opening up an account for Tether directly.”
However, Tether has never been sanctioned, so dealing with the firm in any capacity would not have engendered any legal risk for Signature. Furthermore, Signature Bank and its employees have not been accused of any wrongdoing in this regard.
Wall Street Journal Joins Bloomberg in Exposing Tether
Bloomberg isn’t the only journalist with an eye on the shady dealings behind the scenes of Tether. The Wall Street Journal had a few discoveries of its own to share.
On March 3, the Wall Street Journal published an exposé about companies dealing in Tether and sister exchange Bitfinex. It detailed their efforts to stay connected to the global banking system. Backers of Tether, the article claimed, were resorting to fraud.
Allegedly they falsified documents and used shell companies in the face of a Justice Department’s investigation. The Manhattan US District Attorney’s office is spearheading the investigation.
“The companies often hid their identities behind other businesses or individuals,” the Journal’s report stated.
“Using third parties occasionally caused problems, including hundreds of millions of dollars of seized assets and connections to a designated terrorist organization.”
Tether, will this be the end of yet another great stablecoin or a red flag to heed and pay attention to now before later?