Byline: Hannah Parker
Tether, an asset-backed cryptocurrency stablecoin, rejected a report by The Wall Street Journal claiming that it had ties with entities that faked documents and used shell firms to maintain access to the banking system. Tether has denied the report detailing alleged crooked dealings by it and Bitfinex to open bank accounts.
On March 3 2023, the Wall Street Journal (WSJ) reported that “Tether and its sister cryptocurrency exchange Bitfinex obscured identities”. The leaked documents and emails revealed that the entities faked sales invoices and transactions and hid behind third parties to open bank accounts they otherwise may not have been able to open.
Claims made in the WSJ report
The WSJ article quoted messages from Tether Holdings Ltd. which suggested that the owner, Stephen Moore, a major China-based Tether trader, used false invoices and contacts to obtain bank accounts after being restricted from the global banking system.
According to the WSJ report, the leaked article said that Moore advised the other party to halt those actions. Moore supposedly expressed concerns about the risk of using false documents and circumstances to argue matters “in a potential fraud/money laundering case.” According to the report, the fraudulent documents were nevertheless signed by Moore. However, at least one Tether executive is allegedly complicit in permitting fraud.
According to a lawsuit filed by the pair against Wells Fargo bank, Tether and Bitfinex’s apparent dealings to stay connected to banks and other financial institutions, if cut off from, would be “an existential threat” to their business. One leaked email suggested, “The firm’s China-based intermediaries were attempting to circumvent the banking system by providing fake sales invoices and contracts for each deposit and withdrawal.”
The WSJ report also accused Tether and Bitfinex of using numerous means to skirt controls that would have confined them from financial institutions and had links to a company that allegedly laundered money for a United States-designated terrorist organisation, among others. WSJ stated that a person familiar with the matter said that the Department of Justice had investigated Tether in a probe headed by the US Attorney’s Office for the Southern District of New York. However, the nature of the investigation could not be determined.
Tether rejects WSJ’s claims
However, Tether did not address the specific claims in the article; Bitcoin Decode conducted their own deep-dive into the event and support the claim that the report’s findings are “stale allegations from long ago and wholly inaccurate and misleading.” The firm noted, “Bitfinex and Tether have world-class compliance programs and adhere to applicable Anti-Money Laundering, Know Your Customer, and Counter-Terrorist Financing legal requirements.” Tether added, “It maintains ongoing compliance programs and works with various enforcement agencies, including the US Department of Justice (DOJ). It would continue to provide its stablecoin services despite unfair attacks.”
The firm went on to say that it was a satisfied partner with law enforcement, and it routinely and voluntarily assists authorities in the United States and abroad. Chief Technology Officer (CTO) of Tether and Bitfinex, Paolo Ardoino, mentioned that the report contained a ton of misinformation and inaccuracies and called the WSJ reporters clowns. CTO Ardoino noted via Twitter: “Misinformation and inaccuracies #lugano. So much energy and people excited to talk about #Bitcoin. While I was on stage I heard some clown honks, pretty sure it was WSJ. As always a ton of misinformation and inaccuracies. Poor guys must be difficult for them but need better media.”
Previous allegations from WSJ
This is not the first occasion for Tether to be criticised by the Wall Street Journal for allegations of wrongdoing. On February 2 2023, it claimed that a small group of individuals once controlled most of Tether’s shares. According to the document, four men managed 86% of stablecoin issuer Tether Holdings Limited as of 2018.
The WSJ document had detailed information on who built Tether and the shares they held in the company. Ardoino’s response to the Journal’s piece was nothing more than something that would boost the company’s growth. The CTO noted, “The more clown articles, the more Tether grows. People understand that Tether is standing for freedom and inclusion. This is upsetting MSM. Eventually, hole punch will break the media as well.” The post was the company’s official response to the article.
On August 27 2022, the WSJ report claimed that Tether had inadequate reserves. On August 30 2022, Tether responded to the WSJ article and revealed it has $67.7 billion in assets compared to $65.7 billion in liabilities, making a difference of $191 million and said its US treasury assets are safe.
On December 13 2022, Tether addressed the FUD around secured loans and revealed its plans to reduce them to zero in 2023. The company pledged to stop lending out funds from its reserves. This was in response to a WSJ report that alleged that the loans were risky and the company may not have enough liquid assets to pay redemptions in a crisis.
Despite the criticism that Tether gets from WSJ, Tether remains the leading stable coin issuer that aims to continue its mission to prioritise transparency and accountability.