The U.S. Department of Justice is probing whether executives behind the Tether digital token committed bank fraud during the nascent stages of its cryptocurrency business, Reuters News reported on Monday.
While Taiwan is not known as a crypto hub, Tether kept part of its fortune stashed in banks on the island for some time, until its relationship with a financial institution acting as a bridge between East and West soured. The probe is focusing on events from several years ago when Tether, a stablecoin launched in 2014, was in its early stages, the report said. The agency is examining whether Tether concealed from banks that transactions were linked to crypto, the report added, citing three people with direct knowledge of the matter.
Tether has attracted significant controversy over the question of whether it is fully backed by U.S. dollars. In Tether’s early days, its parent company, crypto exchange Bitfinex, was hacked, forcing some depositors at the exchange to take a “haircut,” losing some of their deposit.
As Tether shared accounts with its parent company, questions emerged as to how much of Tether’s assets were lost or loaned to Bitfinex to cover the losses. After all, without a 1:1 peg with the U.S. dollar, the inherent idea of Tether’s stability would be called into question
Tether routinely has open dialogue with law enforcement agencies, including the U.S. Department of Justice,” the company said in response to the report. “It is business as usual at Tether, and we remain focused on how to best serve the needs of our customers.” A spokesperson for the Department of Justice declined to comment.
The stablecoin universe is so far dominated by two main tokens, Tether and USD Coin. Tether accounts for more than 60% of the total stablecoins issued, worth about $100 billion.
