The Commodity Futures Trading Commission has ordered Tether, the largest stablecoin issuer, to pay a $41 million civil monetary penalty as part of a settlement agreement, according to a press statement published on Oct. 15.
The business was charged with breaching the Commodity Exchange Act (CEA) for making false claims regarding the USDT stablecoin’s one-to-one dollar backing.
Despite claims that Tether’s stablecoin was completely linked to the dollar’s value, the ruling states that the stablecoin has adequate reserves for less than a third of the 26-month timeframe (from 2016 to 2018). Additionally, Tether did not conduct professional audits throughout the aforementioned time period:
Additionally, the order finds that Tether failed to disclose that its reserves included unsecured receivables and non-fiat assets and that Tether misrepresented that it would conduct routine, professional audits to demonstrate that it maintained “100 percent reserves at all times,” despite the fact that Tether reserves were not audited.
Simultaneously, the CFTC levied a $1.5 million fine on iFinex, the parent firm of the Bitfinex exchange, for conducting off-exchange retail commodities transactions.
According to Acting Enforcement Director Vincent McGonagle, the following measures were taken to promote market integrity: As shown by today’s proceedings against Tether and Bitfinex, the CFTC is committed to carrying out its statutory mandate to safeguard the US consumers and promote market integrity.
Paolo Ardoino, CTO of Tether and Bitfinex, expressed optimism in a tweet, saying that the businesses can now put the multi-year inquiry behind them. According to Tether’s official statement, the CFTC has identified no problems with the company’s present operations.
The CFTC’s Order concluded that there are no problems with Tether’s present operations. Indeed, the Order addressed specific disclosures made more than two and a half years ago regarding the reserves. As the Order acknowledges, these problems were completely addressed in February 2019 when the terms of service were revised.
Tether also agreed to an $18.5 million settlement with New York Attorney General Letitia James in February. It also won a major court victory in late September in a trillion-dollar market manipulation case.
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