Tether (USDT) is a cryptocurrency pegged to the US dollar and is often used as a stablecoin. A network of companies around Tether International Limited and Tether Limited operates the scheme. The ownership structure has been the subject of significant speculation and controversy. Online gaming entrepreneur Brock Pierce and Italian plastic surgeon Giancarlo Devasini established Tether Holdings in 2014 in the British Virgin Islands. The Tether scheme is closely intertwined with crypto exchange BitFinex.
Basic Assumptions And Critics
The Tether scheme operates the $68 billion stablecoin USDT (and other stablecoins) with a daily trading volume than bitcoin. The holders of USDT expect each USDT to be backed by FIAT currencies and other assets. Thus the Tether scheme has enough reserves to redeem all the roughly 68 billion USDT in circulating supply.
The Tether stablecoin scheme and Bitfinex are constantly under criticism, especially on Twitter. Some serious critics claim that these schemes were designed to be as fraudulent as Sam Bankman-Fried‘s collapsed crypto exchange FTX. They predict an imminent end with horror for the entire crypto segment.
The Bitfinex-Tether Connection
The relationship between Tether and the crypto exchange Bitfinex, operated by iFinex Inc., registered in the British Virgin Islands, has been the subject of investigations by several authorities. Tether has faced allegations of lacking transparency and being potentially connected to market manipulation. Its association with Bitfinex has led to concerns about the stability of both companies. The ownership and operations of both Tether and Bitfinex continue to be the subject of ongoing scrutiny and investigation by regulators and financial authorities.
Investigations And Settlements
In February 2021, Tether and Bitfinex signed an agreement with the New York attorney general’s office to pay an $18.5 million fine. The NYAG had been investigating the schemes over allegations that they moved hundreds of millions of dollars to cover up a loss of $850 million of commingled client and corporate funds. Allegedly, Bitfinex sent $850 million to the Panamanian payment processor Crypto Capital Corp. After the funds went missing, Bifinex took at least $700 million from Tether’s reserves.
Bitfinex and Tether recklessly and unlawfully covered-up massive financial losses to keep their scheme going and protect their bottom lines
New York Attorney General Letitia James (link)
In October 2021, the U.S. regulator CFTC issued an order against Tether Holdings Limited, Tether Limited, Tether Operations Limited, and Tether International Limited (d/b/a Tether) on the one hand and iFinex Inc., BFXNA Inc., and BFXWW Inc. (d/b/a Bitfinex) on the other hand, for making untrue or misleading statements in connection with the USDT stablecoin. The order required them to pay a $42.5 million fine.
The Owners
The ownership structure of the Tether and Bitfinex scheme and the controlling individuals have been the subject of significant speculation. While Brock Pierce left Tether soon after its incorporation, Giancarlco Devasini is still the scheme’s chief financial officer.
According to publicly available information, Brock Pierce has been associated with several companies in the space, including Tether. However, it is not clear to what extent, if any, he owns Tether or is involved in its management.
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Tether and Bitfinex share top executives who are the majority owners of the stablecoin firm. According to WSJ, Giancarlo Devasini owned roughly 43% of Tether in 2018. The chief executive of both Bitfinex and Tether is Jean-Louis van der Velde; the two companies’ general counsel is Stuart Hoegner. Each owned about 15% of Tether in 2018, WSJ says.
Big Business
Because of rising interest rates, USDT has become a lucrative investment. WSJ calculates that “if Tether’s nearly $68 billion asset portfolio is paying 4.5% a year, roughly what short-term Treasurys are yielding, the company is taking in about $3 billion a year. Tether coins pay no interest.“
